A Snapshot of Juroku Bank Now THE JUROKU BANK,LTD. JUROKU BANK ANNUAL REPORT 2018

鵜飼 匠 支店長 伊藤 鮎美

2nd Stage

Advertisement mascot Advertisement mascot Takumi Ukai Ayumi Itou

005_9337401373009.indd 1-3 m_ns_web_9337401373009.indd 1 2018/09/252018/09/04 14:29:2617:08:04 F inancial Highlights (Consolidated)

PROFILE The Juroku Bank, Ltd. and Subsidiaries Year Ended March 31, 2018

Thousands of The Juroku Bank, Ltd., has its business base in Gifu and Aichi prefectures, the Millions of Yen U.S.Dollars industrial center of the Chubu region of Japan. During the over 140 years since its founding in 1877, it has played a pivotal role as a leading financial institution in its 2018 2017 2018 For the Fiscal Year area. We will continue to follow our philosophy of “serving our community by fulfilling our social mission as a financial institution.” We will also pursue reforms by staying Total income ¥ 104,744 ¥ 125,807 $ 985,919 open-minded, managing our operations rationally and steadily, creating a strong Total expenses 91,133 111,459 857,803 management style through stronger earnings power, and improving our personnel

and organization. Net Income Attributable to Owners of the Parent 9,901 10,036 93,195 The head office of the Bank is located in Gifu prefecture. The Bank has 162 domestic branch offices, mainly in Gifu and Aichi prefectures, as well as representative offices Cash dividends 2,990 2,616 28,144 in Shanghai, Singapore, Bangkok and Hanoi. On a consolidated basis, as of the end of March 2017, the Bank had total deposits of ¥5,443.0 billion (US$51,233 million), At Year-End total assets of ¥6,096.6 billion (US$57,385 million), and a capital ratio of 9.15% Total assets ¥6,096,568 ¥6,038,334 $57,384,864 based on domestic standards. Head Office Loans and bills discounted 4,215,431 4,024,458 39,678,379

Securities 1,300,663 1,339,112 12,242,686

Deposits 5,442,974 5,341,779 51,232,813

Total equity 361,253 347,371 3,400,348

Cash Flows CONTENTS 1 Financial Highlights (Consolidated) 17 Consolidated Statement of Income Net cash used in operating activities ¥ (178,680) ¥ (223,365) $ (1,681,852) 2 Message from the President and CEO 17 Consolidated Statement of Comprehensive Income Net cash provided by investing activities 49,526 392,727 466,171 3 Management Strategy 18 Consolidated Statement of Changes in Equity 10 Non-Performing Loans 19 Consolidated Statement of Cash Flows Net cash used in financing activities (13,223) (10,632) (124,464) 11 Contribution to the Regional Economy and Community 20 Notes to Consolidated Financial Statements Cash and cash equivalents, end of year 343,640 486,024 3,234,563 13 Juroku Bank’s ESG 36 Independent Auditors’ Report 14 Board of Directors and Audit & Supervisory Board Members 37 Corporate Data Note: Amounts stated in United States dollars have been computed, solely for convenience, at the rate of ¥106.24 = US$1, the approximate rate of exchange at March 31, 2018. 14 Organization Chart 37 Affiliates 15 Financial Review 38 Directory 16 Consolidated Balance Sheet

Forward-Looking Statement This annual report contains certain forward-looking statements. Those forward-looking statements are subject to risks and uncertainties, and Juroku Bank’s actual results may differ from those described in the forward-looking statements. We are under no obligation, and expressly disclaim any obligation, to update or alter our forward-looking statements, whether as a result of new information, future events, or otherwise.

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005_9337401373009.inddm_ns_web_9337401373009.indd 4-39 2-3 010_9337401373009.indd 1 2018/09/252018/09/212018/09/04 14:29:2716:18:23 17:08:06 Message from the President and CEO Management Strategy

We will further strengthen our “engagement first” initiatives to The 14th Medium-term Management Plan continue evolving, with the aim of becoming “a financial group In April of 2017, we commenced “‘The 14th Medium-Term Management Plan’ All For Your Smile: Providing Wholehearted that is needed by customers and grows with customers.” Services ~ 2nd Stage ~” which will run for three years from FY2017 to FY2019. In this management plan, with “engagement first” as our cornerstone activity, we will transform our business model to create a positive cycle of “contribution to the growth of customers and local economies” and a “revenue structure with stability and permanency to support local communities” by implementing the six basic strategies of “expanding contact points with customers and offering solutions above and beyond expectations,” “actively getting Looking at the operating environment for regional financial involved in community tasks,” “building strategies by region,” “improving fund management capacity,” “improving management ef- institutions, the harsh business environment continues, in- ficiency to survive competition,” and “helping each employee improve performance.” cluding prolonged low interest rate environment. In addition, FY2019 Year-end Targets Long-term targets local economies face structural challenges, such as population Growth potential Earning capability Financial soundness Earning capability decline and acceleration of aging society with a declining (customer base) birthrate, and there are concerns that the size of the market Community presence Equity ratio (consolidated) Net income (consolidated) (daily-average deposits ROE (consolidated) will shrink in the future. With these circumstances as the +daily-average loans) Full implementation basis backdrop, regional financial institutions are greatly needed ¥10 billion ¥10,000 billion Around 8.7% 5%+ to contribute to the revitalization and development of local economies by supporting the growth of customers. Net income (consolidated) = Net Income Attributable to Owners of the Parent Core capital (before transitional arrangement) To meet this challenge, we commenced “‘The 14th Me- Core capital ratio (full implementation basis) = Risk assets (before transitional arrangement) dium-Term Management Plan’ All for Your Smile: Providing Through these initiatives, we aim to become “a financial group that is needed by customers and grows with customers.” Wholehearted Services ~ 2nd Stage ~” in April 2017. In this plan, we aim to be “a financial group that is needed by custom- ers and grows with customers,” and, with “engagement first” We will be committed to implementing the following basic strategies under the management plan, in as our cornerstone activity, we will transform our business an effort to appropriately address the challenges that surround the Group. model to create a positive cycle of contribution to the growth Basic Strategies of customers and local economies and a revenue structure with stability and permanency to support local communities. • Expanding contact points with customers and offering solutions above and beyond expectations We will develop a sales stance of sincerely tackling the diverse needs and tasks of our customers, while demonstrating our comprehensive At this turning point, we will work on expeditious sales strength as a Group. Business customers reforms suited to the diversifying needs of customers and the We will take risks appropriately and perform financial intermediary functions mainly through business performance evaluations, as well as work rapidly changing business environment. At the same time, to solve our customers’ issues by providing support according to their growth stage. Individual customers we will further push ahead with business reforms which we We will promote comprehensive transactions by providing goods and services according to customers’ life stages to explore their needs. In addi- tion, we will work to improve channel functions through region-specific branch operations and the expansion of non-face-to-face channels. have been pursuing, and provide high-quality “customer- • Actively getting involved in community tasks first” services. As such, we are committed to striving to further The Group will support local governments’ “comprehensive strategy for vitalizing towns, people, and jobs,” while fulfilling its responsibilities to regions through initiatives such as actively participating in regional development projects. improve our corporate value in order to continue to be a bank • Building strategies by region that customers can rely on into the future. In Gifu Prefecture, we will establish an absolute operational base mainly by demonstrating regional financial intermediary functions backed by an extensive branch network and a substantial volume of information. I look forward to receiving the continued support and In Aichi Prefecture, we will further demonstrate our presence including leveraging the growth potential of the market and enhancing our busi- encouragement of all of our stakeholders. ness base, in addition to focusing on business resources. • Improving fund management capacity In addition to improving our capacity to manage marketable securities primarily by diversifying investments to flexibly respond to changes in the market environment, we will work to utilize various financial techniques. July 2018 • Improving management efficiency to survive competition Yukio Murase In addition to accelerating business reforms, we are working to streamline branch operations in view of demographics. President and CEO We will also strive to further optimize our personnel allocation and workforce, including streamlining of the head office organization. • Helping each employee improve performance We will focus on developing human resources that can contribute to customers and regions, using the Bank as a means to do so. We will also carry out work style reform, such as considering mechanisms to encourage employees to take on challenges.

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010_9337401373009.inddm_ns_web_9337401373009.indd 2 4-5 2018/09/21 16:18:24 010_9337401373009.indd 3 2018/09/252018/09/21 14:29:2716:18:24 Corporate Governance Furthermore, an Operational Audit Committee has been Basic Policy on Strengthening Internal Control System An independent third party will regularly evaluate the established to enhance the supervisory functions of the Board Bank’s management of major risks, and the Bank will continu- of Directors on the execution of business operations, thereby fur- We are currently making efforts to build an internal control ally work to improve risk management level evaluations. Basic Policy ther enhancing the corporate governance system. system based on the policies described below. (2) In addition to designating one department to comprehen- The Audit & Supervisory Board comprises four Audit & 1. System to ensure that the execution of duties by di- sively manage risk, individual departments will be made specifi- At Juroku Bank, we believe that retaining the trust of our stake- Supervisory Board Members, including two Outside Audit & rectors of the Bank and its affiliates comply with all cally responsible for each category of risk, ensuring effective risk holders by conducting all of our activities in a sound manner is Supervisory Board Members and two Standing Audit & Supervi- relevant laws, ordinances, regulations, and the Bank’s management. In addition, an organizational structure will be vital to our role as a financial institution. Therefore, we place the sory Board Members (as of June 22, 2018). To support the Audit Articles of Incorporation established, including the Integrated Risk Management Coun- highest priority on building a solid organizational structure and & Supervisory Board Members, we have established the Audit & (1) Our Basic Policy establishes the Bank’s commitment to serve cil chaired by the president and CEO and the Operational Risk establishing systems that continually reinforce corporate gover- Supervisory Board Members’ Office, which monitors the execu- local communities by fulfilling its mission as a financial insti- Management Council chaired by the director in charge of the nance. tion of business operations objectively and ensures appropriate tution, and to seek business growth through sound practices department responsible for comprehensive risk management. In association with the entry into effect of the Companies auditing functions. The Audit & Supervisory Board is held at founded on a broad and rational perspective. Risk management reports will be made to the Board of Direc- Act, we established a Basic Policy related to the Establishment least once a month, in principle. (2) To implement this policy, directors and executive officers of tors on a regular basis, or as necessary. of an Internal Control System at a meeting of the Board of With regard to internal controls, the Audit & Inspection the Bank are responsible for the establishment of various stan- (3) The following are risks to be managed at the Bank. When Directors held on May 24, 2006. Since that time, we have re- Division conducts internal audits, and at least once per year The dards including the Code of Ethics and Compliance Policy, and new risks arise, a department to handle them will be promptly vised this basic policy as necessary and in a timely manner, and Bank seeks outside opinions regarding the development and for ensuring that business is conducted in accordance with these established by the Board of Directors. have endeavored to develop and continuously refine the system management of the internal control system. standards and that laws, ordinances, and the Articles of Incorpo- 1) credit risk, 2) market risk, 3) liquidity risk, 4) operational to ensure the appropriate execution of business at the Bank and Based on these objective opinions, we work to further ration are adhered to. In addition, directors are responsible for risk, and 5) other risks that could have a serious impact on the the corporate group comprising the Bank and its subsidiaries. improve the internal control system. Moreover, to reinforce the steadfastly confronting any anti-social forces that pose a threat Bank’s business. Under this basic policy, we will pursue initiatives to enhance compliance system, we have established a whistle-blower system to social order and safety; thereby directors consolidate a system (4) In addition to establishing a Risk Management Council, the corporate governance. and have improved the effectiveness of the system by using an to sever all ties to these forces. Bank’s affiliates will manage risks in a proper and comprehen- external lawyer as the point of contact. (3) The Bank’s affiliates make best efforts to pursue legitimate sive manner, and set up a system to report any issues related to With respect to the risk control system, we have established and fair business practices that respond to social obligations, risk management to the Bank. The Internal Audit Department Progress Thus Far the Integrated Risk Management Council, Operational Risk based on their own basic policy and management philosophy of the Bank conducts auditing of the Bank’s affiliates to assess Management Council and Compliance Council. These commit- that are adequate for the nature and scale of their business. In their risk management. The Board of Directors comprises nine members including two tees discuss risk management issues both on a regular basis and addition, the affiliates are responsible for the establishment of 4. System to ensure the efficient execution of duties by Outside Directors (as of June 22, 2018) and it is held at least when necessary. At these meetings, the appropriateness of opera- the Code of Ethics and Compliance Policy to ensure that busi- directors of the Bank and its affiliates once a month, in principle, to deliberate and decide matters tions is reviewed and risk management is applied to minimize ness is conducted in accordance with laws and ordinances as well (1) Duties of the Bank will be executed centered on the Basic stipulated in laws and regulations and important manage- loss due to unforeseen circumstances. The Compliance Council is as social norms. Policy and an Action Plan. A Management Plan will be created, ment issues, and it also monitors directors’ conduct of business held as necessary, while the Compliance Committee, its subordi- 2. System for storage and management of information re- and guidelines based on this plan will be established for each operations by having each director report his/her own execution nate body, meets once per month, in principle. In addition, the lated to the execution of duties by directors of the Bank six-month period. of duties at least once every three months, pursuant to Article Integrated Risk Management Council meets once per month, in To ensure efficient verification of proper business practices, regu- (2) Progress made in implementing these plans will be reported 363, Paragraph 2 of the Companies Act. Additionally, in order principle, and the Operational Risk Management Council meets lations will be created and followed on the handling and control to the Board of Directors in a timely manner, and steps will be to further ensure the transparency and fairness of the Board of at least once every 6 months, in principle. We have also signed of information and documents related to business operations (in- taken in response as needed. Directors’ decision-making activities, a Management Advisory consultation agreements with six lawyers, who provide advice on cluding electronic records); adherence to these regulations will (3) Items that should be taken up by the Board of Directors of Council has been established as an advisory body to the Board of legal matters and perform a variety of legal checks when neces- be monitored, and regulations will be revised when necessary. the Bank will be clearly stated in regulations such as the Board Directors. sary. In addition, a system will be established to enable directors of Directors Regulations, and important items will be discussed The Bank has adopted the executive officer system and en- The Bank’s accounts are audited by the independent audit- and Audit & Supervisory Board Members to view this informa- as necessary by the Management Council, which comprises man- sures that executive officers appointed by the Board of Directors ing firm Deloitte Touche Tohmatsu LLC (as of June 30, 2018). tion and the relevant documents when necessary. aging directors or above and other related personnel, to ensure responsibly execute the business operations of the sections in This firm provides accurate audits on the basis of appropriate 3. Risk management regulations and other structures re- that issues are sufficiently examined. In addition, Regulations on their charge. The adoption of the executive officer system allows information disclosure. lated to risk of loss at the Bank and its affiliates Decision-Making Authority Related to Operations will stipulate the Board of Directors to take on the functions of management (1) The Bank positions the risk management as an important the appropriate delegation of authority to subordinates based supervision in a more effective manner, while also enabling Going forward, we will work to further enhance our cor- duty to ensure the soundness and safety of business, and regula- on such factors as the importance of the operation, making the quick decision making by the management team. In terms of porate governance standards and ensure the soundness of our tions related to each type of risk, including a Comprehensive directors’ execution of duties more efficient. important matters affecting the daily conduct of business opera- ethical conduct and financial position. Risk Management Regulation, will be established in order to (4) The Bank will reinforce collaboration with its affiliates and tions, a Management Council, comprising the president and manage risks associated with the business of the Bank and its af- facilitate information sharing. In addition, the management CEO, deputy president and director and managing executive filiates in an exhaustive and comprehensive manner. Efforts will of the Bank and representatives of its affiliates will exchange officers, has been established to enable quick and bold decision be made to appropriately improve the measurement, evaluation, opinions on a regular basis in order to resolve various issues ef- making. and management of risk by following these regulations. ficiently.

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010_9337401373009.inddm_ns_web_9337401373009.indd 4 6-7 2018/09/21 16:18:24 010_9337401373009.indd 5 2018/09/252018/09/21 14:29:2716:18:25 (5) The Bank will establish regulations for top management, 7. System to report matters related to the execution of du- (4) Significant accounting policies and standards and changes to 1) Earn the firm trust of the general public through the organizations, risk management and others, and provide its af- ties by directors of the Bank’s affiliates to the Bank them maintenance of high corporate ethical standards and filiates with necessary information in order to have them create (1) By having officers of the Bank dispatched to its affiliates, the (5) Content of disclosed earnings, projections, and other impor- awareness of the importance of legal compliance; their own systems efficiently in compliance with these regula- Bank will receive reports related to the execution of duties by tant disclosure materials 2) Promote awareness of the crucial importance of compli- tions. directors of its affiliates at the meeting of the Board of Directors (6) Serious violations of the laws and ordinances ance among our staff; and 5. System to ensure that the execution of duties by em- of the affiliates. (7) Operation of the whistle-blower system and notifications 3) Raise standards of compliance rigor still higher. ployees of the Bank and its affiliates complies with laws, (2) The Bank will deliberate or request reports, on a regular (8) Circulation of documents such as draft proposals and the To further enhance the compliance system that we have built ordinances, and the Articles of Incorporation basis or as necessary, to accurately understand business operation minutes of important conference/committee meetings to date, we formulate and implement a compliance program (1) In addition to positioning compliance with laws and ordi- of its affiliates, pursuant to the Group Companies Management (9) Other items deemed necessary by the Audit & Supervisory each fiscal year. Specifically, all departments regularly hold study nances as one of our most important business responsibilities Regulation established by the Bank. Board Members meetings on compliance, and we have implemented curriculums and establishing regulations such as the Code of Ethics and (3) The department undertaking overall control of the Bank’s af- 11. System to ensure that a person who made a report in related to compliance for various training programs in order to Compliance Policy, the Bank will establish a department to pro- filiates and individual departments responsible for each affiliate accordance with the preceding paragraph does not re- boost the awareness of compliance and ingrain a compliance- vide overall control. In addition, a Compliance Council, chaired will monitor the status of affiliates in a timely and appropriate ceive unfair treatment on the grounds of making such oriented corporate culture. by the president and CEO, will be created, and this council will manner, and promptly report any matters deemed important to report be tasked with handling compliance-related issues. the management of the Bank, while taking necessary steps. The Bank and its affiliates prohibit a dismissal or any other (2) In addition to establishing a Compliance Council, the Bank’s 8. Items related to employees whose assignment to assist disadvantageous treatment of the person who made a report Organizational Structure affiliates will manage and operate in-house compliance system Audit & Supervisory Board Members of the Bank in in accordance with the preceding paragraph on the grounds of appropriately and set up a system to report any compliance their duties is requested by them making such report, etc. and take appropriate steps to ensure Compliance Council violation to the Bank. The Internal Audit Department of the An Audit & Supervisory Board Members’ Office will be created that such person will not receive unfair treatment. Bank conducts auditing of the Bank’s affiliates regarding their to assist the Audit & Supervisory Board Members in the perfor- 12. Matters related to treatment of expenses incurred in Chaired by the president and CEO, consisting of managing compliance with laws, ordinances, and others. mance of their duties, and at least one full-time employee will the execution of duties by Audit & Supervisory Board directors and the general managers from relevant divisions, the (3) At the Bank and its affiliates, an in-house system will be be assigned to work in that office. Upon obtaining the opinions Members Compliance Council examines, discusses, and issues directives created for reporting violations of laws and ordinances and of the Audit & Supervisory Board, decisions will be made on In the event that Audit & Supervisory Board Members made a concerning matters of compliance. other compliance-related issues, and a whistle-blower system the positions and qualifications of employees to be assigned to request for reimbursement of expenses incurred in the execution that employs an independent lawyer to receive reports will be engage in this work, and a roster of such employees will be cre- of their duties, it will be granted unless the expenses are proved Compliance Office maintained. Efforts will be made to prevent or promptly detect ated. to be unnecessary to the execution of their duties. (Risk Management Division) problems such as violations of laws. 9. Ensuring the independence of the above employees from 13. System to ensure effective audits by Audit & Supervi- As the entity responsible for overseeing compliance, the Com- 6. System to ensure appropriate operations of the corporate directors and the effectiveness of instructions given to sory Board Members pliance Division promotes compliance programs and serves as group, which is composed of the Bank and its affiliates those employees The representative director will regularly meet and cooperate the secretariat for the Compliance Council. (1) An internal auditing agreement will be concluded with The appointment, transfer, and evaluation of employees who as- with the Audit & Supervisory Board Members to ensure the the Bank’s affiliates, and operations are audited by the Internal sist the Audit & Supervisory Board Members in their duties will effectiveness of audits, and will regularly exchange opinions on Inspection Section Audit Department of the Bank to ensure proper business opera- be subject to the approval of the Audit & Supervisory Board. management problems and progress in auditing to ensure high (Internal Audit Division) tions by the corporate group, which is centered on the Bank. The said employees will solely comply with instructions and accuracy. Operations at affiliates will be audited through various activi- orders given by the Audit & Supervisory Board Members. The section conducts audits and other investigations related to ties, including appointing officers or employees of the Bank as 10. System for officers and employees of the Bank and the compliance conditions in each division. officers of affiliates and having them attend the meeting of the its affiliates to report to Audit & Supervisory Board Compliance System Board of Directors of the affiliates. Members of the Bank and a system for other reports to Compliance at Each Division (2) The management of the Bank and representatives of its affili- Audit & Supervisory Board Members Recognizing that the survival of financial institutions depends Compliance officers are appointed in each of the divisions to ates will exchange opinions on a regular basis to prevent prob- Officers and employees of the Bank and its affiliates and per- on trust, we put top priority on earning the firm trust of the check the day-to-day compliance of those divisions. lems such as inappropriate transactions between the Bank and sons who received reports from them shall submit reports and general public. its affiliates. provide information in response to requests from the Audit & We are further strengthening our compliance system under (3) When engaging in transactions with the Bank’s affiliates and Supervisory Board or individual Audit & Supervisory Board our 14th Medium-Term Management Plan through our policy other entities, steps will be taken to verify that the terms of the Members. The following are the main topics of the reports and which is designed to “promote awareness of the crucial impor- transaction conform to the arms-length principle. information to be provided. tance of compliance among our staff.” (4) A whistle-blower system will be established at the Bank (1) Department activities related to creating the Bank’s internal and all affiliates, making it possible for parties such as affiliate control system employees to make reports or seek advice. (2) Activities of the Bank’s affiliates (5) A system will be created to ensure the reliability of the (3) Matters that may inflict a significant loss on the Bank and its financial reporting of the Group, centered on the Bank. affiliates

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Under the Customer Protection Manage- nisms function effectively with regard to sections within the maintain sound operations, we conduct management appropri- stable cash flows as the primary objective. Moreover, we have ment Policy, we have clearly stated protection measures that we Group subject to auditing (the Bank’s head office divisions, ately with reference to our Credit Risk Management Policies in place a system (Liquidity Risk Contingency Plan) that can had taken as part of compliance and risk management. We are branches and consolidated affiliates), regular, planned, on-site and Credit Risk Management Rules. respond to a wide variety of circumstances promptly and appro- focusing more heavily on customer-oriented management. The audits of such departments are carried out by staff of the Inter- In order to objectively determine a borrower company’s priately. purpose of the policy is to improve the protection and conve- nal Audit Division, which is independent from business opera- credit state and its capacity to repay loans, we perform a credit nience of customers through the following initiatives: tion departments. In this way the Bank verifies the effectiveness rating system in a timely manner and reflect the result of the of its risk management systems. (i) Providing appropriate information and explanations on credit rating in our credit risk management. More specifically, Operational Risk products and services for customers we endeavor to maintain a sound asset base by implementing (ii) Responding properly to requests, consultation, inquiries our own assessment of loan assets and by making appropriate We have drawn up an Operational Risk Management Policies and complaints from customers Comprehensive Risk provision for possible loan losses and write-offs based on the and Operational Risk Management Rules, with separate provi- (iii) Appropriately managing customer information credit rating system. sions for administrative risk, system risk, legal risk, personnel (iv) Properly managing outsourced operations The Bank has formulated a comprehensive risk management Meanwhile, the credit rating system enables a quantification risk, fixed asset risk and reputational risk. We implement nec- (v) Properly managing of conflicts of interest so avoid unfair framework by determining a Comprehensive Risk Management of the credit risk, controls concentration of risk with particular essary measures for required responses by getting the current detriment to the interests of our customers Policy and Rules. borrowers or industries, and further ensures profits that are bal- management status of such risks checked regularly by the The Bank’s risk management does not stop at managing anced by credit costs, and thereby enables the Bank to improve Operational Risk Management Council and reported to the various risks individually, but extends a step ahead to control its credit portfolio. Board of Directors. For the important categories of adminis- trative and system risk, we have drawn up the following sub- Information Security, Management of Customer the total amount of risks to keep it within the range of distrib- Regarding examination of loan applications, we have clearly policies and procedures. Information utable capital, which is defined as “core capital (full implemen- separated the sales promotion and credit screening functions tation basis) less allowance for doubtful accounts,” through the and undertake strict reviews and management under a policy Administrative Risk In line with the top priority that we assign to ensuring the con- risk quantification using statistical methods, thereby enforcing a of screening by borrower business sector. Individual cases are We manage administrative risk through our own Administra- fidentiality of our customers’ personal data, information security comprehensive risk management aiming at ensuring soundness screened by verifying various aspects including the use of funds, tive Risk Management Policies and Administrative Risk Man- risk is addressed by the Bank’s Information Security Manage- of management. income and expenditure plans, and investment outcomes, and by agement Rules. While adapting to the growing diversification ment Rules. We have publicly announced our Declaration of We adopt a flexible approach to required responses by carefully examining a borrower’s resources and plans for repay- and complexity of banking operations, our administration has Personal Information Protection (Privacy Policy). getting the current state of such comprehensive risks checked ment. become more rigorous in an effort to retain and strengthen the As stipulated in the aforementioned Security Management by the Integrated Risk Management Council and Committee, trust of our customers. Rules, we have also appointed a chief information officer at the which meet regularly and report directly to the Board of Direc- System Risk Bank’s headquarters and an information officer in each depart- tors, etc. Market Risk System risk refers to the risk of incurring a loss due to computer ment and branch. We are making every effort to educate em- system failure, malfunction and other errors or system flaws and ployees to bolster their awareness of security issues so that we For market risk, the Market Risk Management Rules have been other deficiencies, as well as the risk of incurring a loss due to can ensure the maximum degree of protection for customer data established, which stipulates the policies for monitoring, control the improper use of computers. This includes “cyber security in daily operations. and mitigation of the risk, along with specific arrangements. risk” that threatens the safety of computer systems and com- The Risk Management Division manages interest rate risk puter networks as a result of cyber attacks. We have established related to deposits and loans, as well as the risk associated with a framework that swiftly responds to system failure through securities, derivatives and other markets. Our current positions, our Computer System Failure Action Rules and Center Failure Risk Management unrealized gains/losses and risk indicators such as BPV and VaR Rules. are measured and evaluated on a daily or monthly basis and To prepare for contingencies that cannot be dealt with us- The importance of risk management has grown as the risks con- reported to management. From the perspective of managing ing our conventional risk management mechanisms, we have fronting financial institutions have become more complex and assets and liabilities together, we hold monthly Integrated Risk compiled a Business Continuity Plan, and have taken measures diverse. Recognizing risk management as crucial for safe and Management Council meetings, forecast interest rates, stock that would enable us to continue major business operations even sound operations, we have established a Comprehensive Risk prices and exchange rates, as a set of measures to enable an under emergency conditions. Management Policy and other policies and rules relating to risk appropriate response to risk. management that enable an appropriate and prompt response to At Juroku Bank, we recognize the importance of integrated various types of risk. risk management, and we will continue working to enhance the We have established the Risk Management Division to step sophistication of our risk management system. up our commitment in this area. We aim to further strengthen our risk management system through use of the PDCA cycle,

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The Bank provides information about the status of its assets in lem assets. Third, we disclose the value of Risk-Monitored Loans our staff to the Joint Stock Commercial Bank for Investment and three different ways. First, we conduct self assessment to calcu- based on the Banking Law, which excludes non-loan assets such Activities to Revitalize the Regional Development of Vietnam and forming a business alliance with Hà Economy Nam Province. In order to further deepen collaboration with local late appropriate write-offs and reserves by classifying borrowers as foreign exchange, accrued interest and advance payments. business partners and cooperating partners, we commenced opera- according to their financial soundness. Second, disclosure based tions as a representative office. With our on “The Financial Reconstruction Law” is used to classify prob- overseas support structure comprising Environmental Conservation Activities overseas representative offices at four loca- tions and 15 cooperating financial institu-  Basic Philosophy tions across 11 countries, we will further Asset Self-Assessment / Assets Disclosed under the Financial Reconstruction Law / The Juroku Bank Group recognizes that the whole society needs strengthen our initiatives to connect our to be responsible for environmental conservation activities. As customers and overseas markets. Risk-Monitored Loans under the Banking Law (as of March 31, 2018) a good corporate citizen that serves local communities, we will contribute to the formation of a sustainable society and create  Support for the Exhibition at Hong Kong’s “Food Expo 2017” (Non-consolidated) Billions of Yen corporate value by diligently addressing environmental issues -Supporting exhibitors at Asia’s largest food trade fair- Assets disclosed under the Financial Reconstruction Law Risk-monitored loans through our business activities. In August 2017, Food Expo 2017 hosted by the Hong Kong Asset Self-Assessment and coverage of the claims Loans only For all assets Trade Development Council was held in Hong Kong. Juroku For all claims (no other type of credit included)  Promoting Environmental Conservation through “Seed Bank supported the exhibitors, jointly with Gifu Economic Classification Borrower category Classification Portion of claims Reserves Coverage ratio Classification Loan balances to Seed Eco-Continuity Project” Balances of credits Balances of claims secured*2 and Industrial Promotion Center and three regional banks that I II III IV Since May 2014, Juroku Bank has promoted the “Seed to Seed are collaborating in overseas business support, by securing a Legally bankrupt borrowers Bankrupt and Eco-Continuity Project,” in cooperation with Gifu University dedicated exhibition stand, as well as by subsidizing half of Bankrupt loans 3.5 3.6 3.0 0.5 — — quasi-bankrupt assets and the Gifu City Global Warming Countermeasure Promotion the exhibition fee and preparing and distributing brochures for [0.8] (0.1) (2.7) [0.8] Committee. Morning glory seeds were distributed to the Bank’s promoting the products of exhibitors. 14.5 4.8 9.7 100.0% Virtually customers in the previous year, planted and grown at each On the special stage in the venue of the Food Expo, the bankrupt borrowers [6.0] household, and this fiscal year, the next batch of seeds, roughly employees (students) of the exhibitor, Gifusho Corporation (a 10.9 8.3 2.6 — — 40,000 pieces were provided by them for distribution at 37 of [5.2] (1.1) (5.7) company wholly owned by all the stu- Non-accrual loans our branches in Gifu city. In addition, we also received the coop- Potentially 61.2 dents of Gifu Commercial & Business bankrupt borrowers Doubtful assets [55.5] eration of elementary schools and special needs schools in Gifu High School) served as presenters and 50.4 29.6 11.6 9.2 50.4 34.3 6.9 81.7% city, and distributed morning glory seeds to each school. advertised the specialty products of Gifu (6.9) Prefecture such as ayu (sweetfish),ayu Substandard loans*3 Past due loans 0.2 Poster Contest to Raise Awareness regarding Ecological Activities snacks and kaki (Japanese persimmon). Borrowers requiring (3 months or more) Let’s protect the global environment through ecological activities! caution 3.8 1.6 0.1 46.1% Restructured loans 3.5 We called on people to participate in ecological activities by means of  Holding “Program for Supporting Global Market Development” wonderful posters drawn by the students of the -Public and private sectors work together to support Substandard Sub-total Affiliated Elementary School, Faculty of Educa- borrowers 68.7 40.7 16.7 83.6% Total 68.6 tion, Gifu University! development of overseas sales routes, etc.- 4.8 0.5 4.3 [60.3] From September to November 2017, we held the “Program for [60.1] Supporting Global Market Development” jointly with Japan Others*1 Ratio of disclosed claims under the Financial Reconstruction Ratio of risk-monitored loans to total External Trade Organization (JETRO) Gifu Trade Information Law (subtotal) to total credits loans 372.1 116.1 255.9 Center. In this program, which was conducted on three occa- Normal assets Figures in brackets are those after application of partial charge-offs (direct deduction). Figures in brackets are those after ap- sions, ASEAN market trends, the key points regarding strat- 4,221.5 1.6% plication of partial charge-offs (direct egy formulation and branding related to overseas expansion of Normal borrowers 3,848.5 [1.4%] deduction). small- and medium-sized enterprises, and initiatives for recruit- 3,848.5 1.6% Gold Award winning poster in Gold Award winning poster in the elementary school section the junior high school section ing high-level human resources were explained in a workshop [1.4%] format. In addition, individual consultation sessions were con- Total Total ducted for companies which requested such consultation. 4,290.2 4,006.1 275.0 9.2 — 4,290.2 Juroku Bank’s Support for Overseas Business Juroku Bank will work to strength- [4,281.8] (8.1) (8.5) [4,281.8] Development en overseas business support mainly for *1 Borrowers requiring caution, excluding substandard borrowers *3 Substandard claims consist of loans only. export strategies and development of *2 Portion of claims secured by collateral or guarantees  Opening of Hanoi Representative Office in Vietnam overseas sales routes for our local com- -First regional bank to start operations in Hanoi- panies while collaborating with a wide Notes: 3. Amounts in asset self-assessment are those after deduction of Our customers are responding to the growth of emerging mar- range of institutions in the future. kets in Asia with an increase in initiatives to develop overseas specific reserves for possible loan losses, and the amounts in sales routes and move production to overseas markets. In March 1. Amounts in asset self-assessment and claims disclosed under parentheses are specific reserves for each classification.  Holding “Indonesia Business Information Exchange 2018, Juroku Bank opened a Hanoi Representative Office for Meeting in Jakarta 2017” the Financial Reconstruction Law and the coverage of claims are the first time among regional banks. In July 2017, we held “Indonesia Business Information Ex- rounded to the nearest 100 million yen. Amounts in risk-mon- 4. The Bank does not implement partial charge-offs (direct deduc- Vietnam is a country with a diligent population and an abun- change Meeting in Jakarta 2017” in Jakarta, Indonesia jointly itored loans are rounded down to the nearest 100 million yen. tion). If partial charge-offs were implemented, relevant figures dant labor pool that is young and outstanding, as well as a favor- with Joyo Bank, Hyakujushi Bank, Nanto Bank and Yamaguchi Figures for ratios are rounded down to the first decimal place. would decline to the figures shown in brackets. able investment environment due to infrastructure development, Financial Group. This was the fourth overseas business infor- such as industrial zones for Japanese companies. Accordingly, mation exchange meeting hosted by these participating banks about 150 of our customers currently have operations in Vietnam. following the meeting held in Qingdao, China in July 2016. 2. All credit items = Loans + Customers’ liabilities for acceptances In particular, Hanoi, the capital located in the northern part of and guarantees + Bonds issued through private placements cov- During the seminar in the first part, lectures were given on Vietnam, has shown conspicuous economic development in recent themes such as “Things You Should ered by guarantees of the Bank + Foreign exchanges + Suspense years and is close to China and Japan. Know about Tax and Accounting.” At payments with a similar nature to loans + Accrued interest. For these reasons, our local companies the exchange meeting in the second are expected to continue expanding into part, customers of these banks operat- Hanoi in the future. ing in Indonesia actively exchanged In the past, we have actively support- information. 10 ed business entry mainly by dispatching 11

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CSR Activities business operators as prior follow-up for operators participating in Juroku Bank aims to realize sustainable local communities by proactively pursuing initiatives to address ESG (Environment, Social and the business conferences, and provided opportunities for refining Governance) issues. Through such initiatives, we will become actively involved in community tasks with a view to creating a positive product planning and the method of proposal by incorporating  Initiatives for “Gifu University×Juroku Bank×NEXCO the opinions of young people. cycle where local economies and Juroku Bank grow together. Central Japan ‘Discover Local Ingredients Project’” Through these initiatives, Juroku Bank will continue to con- Awarded by Cabinet Office tribute to regional revitalization in the future.  Environment In February 2018, initiatives Forest Protection Activities for the collaborative project  Contributions to the Community by the JUROKU -Forest protection through cooperation with government- between Juroku Bank, Gifu FOUNDATION FOR REGIONAL PROMOTION Agreement on forest protection “Juroku Bank’s Forest MITAKE” University and NEXCO Central “Clara Saal Juroku Music Hall” Japan, “Gifu University×Juroku entered its third year since its In September 2017, we agreed to conduct forest protection activities through coopera- Bank×NEXCO Central Japan opening. In FY2017, five con- tion with Mitake Town and Gifu Prefecture, and entered into an agreement on forest ‘Discover Local Ingredients certs were held under the spon- Project,’” were awarded as protection “Juroku Bank’s Forest MITAKE” with Gifu Prefecture and Mitake Town. sorship of the Foundation. In Following this, we started forest protection activities in November 2017. “‘Characteristic Efforts’ of Financial Institutions Contributing March 2018, Ms. Ayako Uehara, In May 2018, 120 people, including new employees, learned about the initiatives to Regional Revitalization” in FY2017 by the Cabinet Office. In a world-class pianist who has this project, we created opportunities for discovering ingredients connections with Clara Saal, held of Mitake Town, an environmental model city, as well as implemented forest protection with strong local characteristics through business conferences a concert. Also, more than 40 groups used the music hall rental activities. Going forward, Juroku Bank will make efforts to preserve the rich nature and developing sales routes to consumers who use highway ser- service. We will continue to meet the expectations of people in and continue to contribute to the realization of a sustainable society as part of social vice areas. Furthermore, we not only held business conferences, local communities through art and culture. contribution activities. but also conducted workshops with university students and South Korea  Society Business cooperation: Shinhan Bank Japan China (Japanese subsidiary of Shinhan Bank) Activities to Improve Labor Environment of Local Community Business cooperation: We support women who work energetically! Bank of Communications, Bank of China, Corporate Industrial and Commercial Bank of China Business Division Myanmar Hanoi International Office Following the proposals of the “Shine Nadeshiko Project,” which aims to promote women’s participation and advancement in the Business cooperation: Representative Mexico Ayeyarwady Bank Office Shanghai Business cooperation: workplace, we have introduced a 16-item program by April 2017. Accordingly, we established “Juroku Smile Room” as the first in- Representative BANCO NACIONAL DE MÉXICO, house childcare facility among regional banks in the three prefectures of Tokai area. In about two years from its opening, Juroku Smile India Office S.A., INTEGRANTE DEL GRUPO Business cooperation: FINANCIERO BANAMEX (Banamex) State Bank of India Room has been used by 27 employees. Furthermore, the percentage of employees who take the “spouse maternity leave,” which was Thailand Philippines introduced in April 2017 with the aim of encouraging men to participate in childcare, stands at 94.3%. In addition, with the appoint- Business cooperation: Business cooperation: KASIKORNBANK Vietnam BDO Unibank ment of three women as business branch managers in April 2018, a Business cooperation: total of 12 female branch managers are playing active roles. Bangkok Malaysia Joint Stock Commercial Bank for Representative Business cooperation: Investment and Development of From the introduction of the program to its widespread use, Office CIMB Bank Berhad Vietnam (BIDV) Brazil CIMB Investment Australia and New Zealand Banking Group Business cooperation: and then to the active appointment of female leaders, Juroku Bank’s Singapore Bank Berhad Banco do Brasil S.A. Representative initiatives to promote women’s participation and advancement in the Office workplace are making a transition to the second stage with a view to Indonesia Business cooperation: evolving further. Bank Negara Indonesia

New Topic  Governance We have realized fair and transparent decision-making through the establishment of an appropriate corporate governance system.  Comprehensive Business Alliance with Tokai Tokyo Financial Holdings In March 2018, Juroku Bank and Tokai Tokyo Financial Holdings, Inc., which are both based in the Tokai area, reached an agreement on the comprehensive business alliance. They will fortify the business base by mutually supporting each other’s operations as equal business part- Including two Outside Audit & ners, as well as promote initiatives that contribute to the community. Supervisory Board Members The two companies will establish a securities company during FY2019 by way of joint Including two Outside Directors Personnel Advisory Committee investment that is designed to combine their strengths, and offer a wide array of high-quality Compensation Advisory Committee products and services suited to the needs of customers as a financial group of the next genera- tion that goes beyond banking and securities brokerage. President J Deputy President J Objective of the alliance Director and Managing Executive Officers 1. Through the alliance between Juroku Bank and Tokai Tokyo Financial Holdings, which are

both based in the Tokai area, the two companies will mutually support each other’s opera- J THE JUROKU BANK,LTD. Directors, Executive Officers tions as equal business partners to fortify the business base.

2. The both companies will present the form of the financial group of the next generation that J J goes beyond banking and securities brokerage and enhance their respective corporate value J by offering a wide array of high-quality products and services suited to the needs of custom- ers by forming an alliance through the maximum use of resources of both companies.

12 13

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The Juroku Bank, Ltd. (as of June 30, 2018) President and CEO Yukio Murase Business Environment Financial Position Deputy President Naoki Ikeda Director and Managing Executive Officers During the fiscal year under review, the Japanese economy In relation to balance of deposits, while striving to procure low Hiroyuki Ota showed a high level of corporate earnings with the continuation cost stable, long-term funds, the Bank also worked to strength- Kimio Hirose Kazuhito Akiba of monetary easing measures and strong exports and produc- en its lineup of investment products. These included investment Yukiyasu Shiraki tion backed by a moderate recovery in the global economy. Both trusts, pension insurance and whole life insurance, and public Director and Executive Officer domestic and overseas demand grew mainly due to a gradual bonds as a positive response to growing and diversifying asset Yukio Murase Akihide Ishiguro President and CEO improvement in personal consumption while the number of management needs, particularly among individuals. As a result, Outside Directors Yasuharu Takamatsu employees maintained high growth and wages also increased. our balance of deposits as of March 31, 2018 increased by ¥55.1 Yuji Kume In the region of the Bank’s core business, Gifu and Aichi billion to ¥5,523.7 billion, mainly due to an increase in deposits Managing Executive Officers prefectures, although personal consumption generally remained from individuals. Furthermore, the balance of individual cus- Yoshinobu Takahashi flat, continued strength in corporate exports, production and tomer assets increased by ¥97.4 billion to ¥4,441.8 billion. Executive Officers Satomi Nishibu capital investment drove the recovery of the Tokai economy. In lending activities, the Bank responded actively to de- Matsuo Uchihori mands for funds from local enterprises, particularly small to Katsuhiko Okuda medium enterprises. In addition, we worked actively to provide Koichi Tokoro Naoki Ikeda Shigeki Fujii Deputy President Performance mortgage loans and other financing to individuals. Conse- Etsuro Ono quently, our balance of loans as of March 31, 2018 increased by Shin Mishima Ordinary income from banking operations decreased by ¥21,409 Hiroaki Sugino ¥193.1 billion to ¥4,233.5 billion. Standing Audit & Supervisory Board Members million to ¥78,566 million, mainly due to a decrease in gains With regard to securities, in addition to underwriting and Koji Iwata on sales of Japanese government bonds and other, despite an in- purchasing central and local government bonds, while closely Naohiko Ishikawa crease in fees and commissions. Ordinary expenses decreased by watching market conditions, the Bank engaged in transactions Outside Audit & Supervisory Board Members Hiroyuki Ota Kimio Hirose Kazuhito Akiba Yukiyasu Shiraki ¥21,635 million to ¥66,323 million, due primarily to a decrease of foreign securities, investment trusts and others in order to ef- Hideo Kono Director and Managing Director and Managing Director and Managing Director and Managing Shinji Ishihara Executive Officer Executive Officer Executive Officer Executive Officer in loss on sales of Japanese government bonds and other. As a ficiently manage funds. As a result, our balance of securities as of result, ordinary profit increased by ¥225 million to ¥12,242 March 31, 2018 decreased by ¥38.3 billion to ¥1,304.6 billion. million. Net cash used in operating activities amounted to ¥178,680 In the leasing business, ordinary income increased by ¥637 million (¥223,365 million was used in the previous term), million to ¥22,306 million, while ordinary expenses increased mainly as a result of an increase in loans. Net cash provided by O rganization Chart by ¥810 million to ¥21,694 million, and ordinary profit de- investing activities amounted to ¥49,526 million (¥392,726 creased by ¥173 million to ¥611 million. million was provided in the previous term), mainly as a result The Juroku Bank, Ltd. (as of June 30, 2018) In other businesses, including the credit card business and of the sales of securities. Net cash used in financing activities Audit & Supervisory Board Members’ Office credit guarantee business, ordinary income decreased by ¥84 amounted to ¥13,222 million (¥10,631 million was used in the Internal Audit Division million to ¥5,839 million, ordinary expenses increased by ¥586 Treasury and Investment Division previous term), mainly as a result of redemption of subordinated General Meeting of million to ¥4,748 million, while ordinary profit decreased by bonds. As a result, the closing balance of cash and cash equiva- Shareholders Operations Administration Division Audit & Supervisory ¥670 million to ¥1,090 million. Board Members Business Integration Division lents decreased by ¥142,383 million during the term under Personal Business Division As a result, ordinary income on a consolidated basis de- review, to ¥343,640 million. Audit & Supervisory Corporate Business Division creased by ¥21,052 million to ¥104,744 million and ordinary International Office Board expenses decreased by ¥20,428 million to ¥90,810 million, Shanghai Representative Office Singapore Representative Office while ordinary profit decreased by ¥624 million to ¥13,934 million and net income attributable to owners of the parent Board of Directors Internal Audit Board Bangkok Representative Office Hanoi Representative Office decreased by ¥135 million to ¥9,901 million. Public Business Division Aichi Business Division Enterprise Support Division Risk Management Division Operational Reform Division Corporate Administration Division Management Meeting Corporate Planning Division Secretariat Head Office Nagoya Main Office Domestic Branches (159) 14 15

010_9337401373009.inddm_ns_web_9337401373009.indd 14 16-17 2018/09/21 16:18:35 010_9337401373009.indd 15 2018/09/252018/09/21 14:29:3016:18:35 C onsolidated Balance Sheet C onsolidated Statement of Income

The Juroku Bank, Ltd. and Consolidated Subsidiaries March 31, 2018 The Juroku Bank, Ltd. and Consolidated Subsidiaries Year Ended March 31, 2018

Thousands of Thousands of Millions of Yen Millions of Yen U.S. Dollars (Note 1) U.S. Dollars (Note 1) 2018 2017 2018 Income: 2018 2017 2018 ASSETS: Interest on: Cash and due from banks (Notes 3 and 26) ¥ 344,412 ¥ 486,264 $ 3,241,830 Loans and discounts ¥ 39,880 ¥ 41,209 $ 375,377 Call loans and bills bought 1,000 — 9,413 Securities 11,540 18,260 108,622 Trading securities (Notes 4 and 26) 531 790 4,998 Other 419 417 3,944 Money held in trust (Notes 5 and 26) 7,012 7,007 66,001 Fees and commissions 19,062 16,676 179,424 Other operating income (Note 4 and 20) 25,010 39,349 235,410 Securities (Notes 4, 10, 11 and 26) 1,300,663 1,339,112 12,242,686 Other income (Note 21) 8,833 9,896 83,142 Loans and bills discounted (Notes 6, 26 and 27) 4,215,431 4,024,458 39,678,379 Total Income 104,744 125,807 985,919 Foreign exchanges (Notes 6 and 7) 8,497 8,785 79,979 Expenses: Lease receivables and investments in leases (Notes 11 and 25) 51,499 47,870 484,742 Interest on: Other assets (Notes 8, 11, 26 and 28) 96,491 57,574 908,236 Deposits 1,528 2,268 14,383 Premises and equipment (Note 9) 65,663 66,105 618,063 Borrowings and re-discounts 366 408 3,445 Goodwill 3,119 3,364 29,358 Payables under repurchase agreements 1,162 1,452 10,938 Intangible assets 5,116 5,991 48,155 Other 43 628 404 Fees and commissions 6,476 6,860 60,956 Asset for retirement benefits for employees (Note 16) 3,525 1,212 33,180 Other operating expenses (Note 4) 25,045 40,944 235,740 Deferred tax assets (Note 24) 567 608 5,337 General and administrative expenses (Note 22) 54,633 56,136 514,241 Customers’ liabilities for acceptances and guarantees (Note 10) 18,221 18,109 171,508 Impairment loss on long-lived assets 94 129 885 Reserve for possible loan losses (Note 26) (25,179) (28,915) (237,001) Other expenses (Note 23) 1,786 2,634 16,811 Total Assets ¥6,096,568 ¥6,038,334 $57,384,864 Total Expenses 91,133 111,459 857,803 Income before Income Taxes 13,611 14,348 128,116 Income Taxes (Note 24): LIABILITIES AND EQUITY: Current 3,853 2,005 36,267 Liabilities: Deferred (705) 1,466 (6,636) Deposits (Notes 11, 12 and 26) ¥5,442,974 ¥5,341,779 $51,232,813 Total Income Taxes 3,148 3,471 29,631 Negotiable certificates of deposit (Note 26) 49,600 97,679 466,867 Net Income 10,463 10,877 98,485 Payables under repurchase agreements (Notes 11 and 26) 98,874 54,724 930,666 Net Income Attributable to Noncontrolling Interests 562 841 5,290 Net Income Attributable to Owners of the Parent ¥ 9,901 ¥ 10,036 $ 93,195 Payables under securities lending transactions (Notes 11) — 50,732 — Borrowed money (Notes 11 and 13) 47,775 46,744 449,689 Yen U.S. Dollars Foreign exchanges (Note 7) 881 1,230 8,293 2018 2017 2018 Bonds (Note 14) — 10,000 — Per Share of Common Stock (Notes 2.u and 30): Other liabilities (Notes 13, 15, 17, 25, 26 and 28) 49,911 45,012 469,795 Basic net income ¥264.93 ¥268.56 $2.49 Liability for retirement benefits for employees (Note 16) 6,704 6,670 63,102 Diluted net income 264.65 268.32 2.49 Liability for retirement benefits for directors and Audit & Supervisory Board members 6 6 57 Cash dividends applicable to the year Deferred tax liabilities (Note 24) 13,045 10,933 122,788 Common stock 80.00 7.00 0.75 Deferred tax liabilities for land revaluation surplus 7,324 7,345 68,938 Note: Effective October 1, 2017, the Bank implemented a 1-for-10 reverse stock split of common stock. Basic net income and diluted net income are de- Acceptances and guarantees (Note 10) 18,221 18,109 171,508 termined based on the assumption that the reverse stock split was carried out at the beginning of the year ended March 31, 2017. The cash dividends Total Liabilities 5,735,315 5,690,963 53,984,516 applicable to the year ended March 31, 2018 are presented on a post-reverse stock split basis. Dividends per share are not retroactively adjusted. See notes to consolidated financial statements. Commitments and Contingent Liabilities (Note 27)

Equity (Notes 18, 19 and 31): Common stock: authorized, 46,000,000 shares in 2018 and 460,000,000 shares in 2017; 36,839 36,839 346,753 C onsolidated Statement of Comprehensive Income issued, 37,924,134 shares in 2018 and 379,241,348 in 2017 Capital surplus 48,282 48,179 454,462 The Juroku Bank, Ltd. and Consolidated Subsidiaries Year Ended March 31, 2018 Stock acquisition rights 130 111 1,224 Thousands of Millions of Yen Retained earnings 192,824 185,866 1,814,985 U.S. Dollars (Note 1) Treasury stock - at cost: 562,512 shares in 2018 and 5,517,209 shares in 2017 (1,574) (1,536) (14,816) 2018 2017 2018 Accumulated other comprehensive income Unrealized gain on available-for-sale securities (Note 4) 52,723 48,010 496,263 Net income ¥ 10,463 ¥ 10,877 $ 98,485 Other Comprehensive Income (Loss) (Note 29): Land revaluation surplus 14,490 14,537 136,389 Unrealized gain (loss) on available-for-sale securities 4,804 (17,225) 45,218 Defined retirement benefit plans (Note 16) (468) (2,267) (4,405) Land revaluation surplus — (0) — Total 343,246 329,739 3,230,855 Defined retirement benefit plans 1,799 2,127 16,933 Noncontrolling interests 18,007 17,632 169,493 Total other comprehensive income (loss) 6,603 (15,098) 62,151 Total Equity 361,253 347,371 3,400,348 Comprehensive Income (Loss) ¥ 17,066 ¥ (4,221) $ 160,636 Total Liabilities and Equity ¥6,096,568 ¥6,038,334 $57,384,864 Total Comprehensive Income (Loss) Attributable to: Owners of the parent ¥ 16,414 ¥ (5,140) $ 154,499 Note: Effective October 1, 2017, the Bank implemented a 1-for-10 reverse stock split of common stock. The numbers of shares are not retroactively adjusted. Noncontrolling interests 652 919 6,137 See notes to consolidated financial statements. See notes to consolidated financial statements. 16 17

011_9337401373009.inddm_ns_web_9337401373009.indd 16 18-19 2018/09/04 17:40:31 011_9337401373009.indd 17 2018/09/252018/09/04 14:29:3017:40:31 C onsolidated Statement of Changes in Equity C onsolidated Statement of Cash Flows

The Juroku Bank, Ltd. and Consolidated Subsidiaries Year Ended March 31, 2018 The Juroku Bank, Ltd. and Consolidated Subsidiaries Year Ended March 31, 2018

Thousands Millions of Yen Thousands of Millions of Yen Accumulated Other U.S. Dollars (Note 1) Outstanding Comprehensive Income 2018 2017 2018 Number of Common Capital Stock Retained Treasury Noncon- Total Operating Activities: Shares of Acquisition Total trolling Stock Surplus Rights Earnings Stock Unrealized Gain Land Defined Interests Equity Common Stock on Available Revaluation Retirement Income before income taxes ¥13,611 ¥14,348 $128,116 -for-sale Securities Surplus Benefit Plans Adjustments for: Income taxes - paid (1,856) (6,317) (17,470) Balance at April 1, 2016 373,650 ¥36,839 ¥48,170 ¥106 ¥178,256 ¥(1,555) ¥65,313 ¥14,727 ¥(4,394) ¥337,462 ¥16,721 ¥354,183 Income taxes - refund 1,734 1 16,322 Net income attributable Depreciation 4,461 4,447 41,990 — — — — 10,036 — — — — 10,036 — 10,036 to owners of the parent Impairment loss on long-lived assets 94 129 885 Cash dividends, ¥7.00 Interest income recognized on statements of income (51,839) (59,886) (487,943) — — — — (2,616) — — — — (2,616) — (2,616) per share on common stock Interest expense recognized on statements of income 3,099 4,756 29,170 Transfer of land revaluation surplus — — — — 190 — — — — 190 — 190 Net (gain) loss on securities (2,234) 2,211 (21,028) Purchase of treasury stock (26) — — — — (9) — — — (9) — (9) Unrealized (gain ) loss on derivatives (1,008) 224 (9,488) Disposal of treasury stock 100 — 9 — — 28 — — — 37 — 37 Net decrease in reserve for possible loan losses (3,736) (6,855) (35,166) Net change in the year — — — 5 — — (17,303) (190) 2,127 (15,361) 911 (14,450) Net decrease in asset for retirement benefits for employees 249 1,462 2,344 Balance at April 1, 2017 373,724 36,839 48,179 111 185,866 (1,536) 48,010 14,537 (2,267) 329,739 17,632 347,371 Net increase (decrease) in liability for retirement benefits for employees 39 (79) 367 Purchase of shares of Net increase in liability for retirement benefits for directors and — 101 — — — — — — 101 — 101 — 0 — consolidated subsidiaries Audit & Supervisory Board members Net income attributable Net increase in loans (190,973) (94,892) (1,797,562) — — — 9,901 — — — — 9,901 — 9,901 to owners of the parent Net increase in deposits 101,196 91,637 952,523 Cash dividends, ¥80.00 Net (decrease) increase in negotiable certificates of deposit (48,079) 25,091 (452,551) — — — (2,990) — — — — (2,990) — (2,990) per share on common stock Net increase in borrowed money (excluding subordinated loans) 1,030 8,897 9,695 Transfer of land revaluation surplus ———47 ————47 —47 Net increase in due from banks (excluding cash equivalents) (531) (66) (4,998) Purchase of treasury stock (25) — — — — (57) — — — (57) — (57) Net increase in call loans and others (1,000) — (9,413) Disposal of treasury stock 70 — 2 — — 19 — — — 21 — 21 Net increase (decrease) in call money and others 44,149 (53,751) 415,559 Net change in the year (336,407) — — 19 — — 4,713 (47) 1,799 6,484 375 6,859 Net (decrease) increase in money held in trust (4) 5 (38) Balance at March 31, 2018 37,362 ¥36,839 ¥48,282 ¥130 ¥192,824 ¥(1,574) ¥52,723 ¥14,490 ¥ (468) ¥343,246 ¥18,007 ¥361,253 Net decrease in payables under securities lending transactions (50,732) (216,521) (477,522) Net increase in lease receivables and investments in leases (3,630) (1,081) (34,168) Note: Effective October 1, 2017, the Bank implemented a 1-for-10 reverse stock split of common stock. The numbers of shares and dividends per share Interest income - cash basis 52,109 62,709 490,484 are not retroactively adjusted. The decrease of 336,407 thousand shares in common stock is due to the decrease of 341,317 thousands shares in the number of shares outstanding and Interest expense - cash basis (3,586) (5,886) (33,754) decrease of 4,910 thousand shares in treasury stock as a result of reverse stock split. Other - net (41,243) 6,052 (388,206) Total adjustments (192,291) (237,713) (1,809,968) Net cash used in operating activities (178,680) (223,365) (1,681,852) Thousands of U.S. Dollars (Note 1)

Accumulated Other Investing Activities: Comprehensive Income Noncon- Common Capital Stock Retained Treasury Total Purchases of securities (475,668) (688,573) (4,477,297) Stock Surplus Acquisition Total trolling Equity Rights Earnings Stock Unrealized Gain Land Defined Interests Proceeds from sales of securities 363,655 964,344 3,422,957 on Available Revaluation Retirement -for-sale Securities Surplus Benefit Plans Proceeds from maturities of securities 164,988 122,102 1,552,974 Purchases of premises and equipment (2,523) (2,791) (23,748) Balance at April 1, 2017 $346,753 $453,492 $1,045 $1,749,492 $(14,458) $451,901 $136,831 $(21,338) $3,103,718 $165,964 $3,269,682 Purchases of intangible assets (990) (2,604) (9,318) Purchase of shares of — 951 — — — — — — 951 — 951 Proceeds from sales of premises and equipment 99 303 932 consolidated subsidiaries Other - net (35) (54) (329) Net income attributable — — — 93,195 — — — — 93,195 — 93,195 Net cash provided by investing activities 49,526 392,727 466,171 to owners of the parent Cash dividends, $0.75 — — — (28,144) — — — — (28,144) — (28,144) per share on common stock Financing Activities: Transfer of land revaluation surplus — — — 442 — — — — 442 — 442 Repayment of subordinated loans — (8,000) — Purchase of treasury stock — — — — (537) — — — (537) — (537) Redemption of subordiated bonds (10,000) — (94,126) Disposal of treasury stock — 19 — — 179 — — — 198 — 198 Proceeds from sales of treasury stock 2 1 19 Net change in the year — — 179 — — 44,362 (442) 16,933 61,032 3,529 64,561 Acquisition of treasury stock (57) (9) (537) Balance at March 31, 2018 $346,753 $454,462 $1,224 $1,814,985 $(14,816) $496,263 $136,389 $ (4,405) $3,230,855 $169,493 $3,400,348 Dividends paid (2,999) (2,624) (28,229) Payments from changes in ownership interests in subsidiaries that (169) — (1,591) See notes to consolidated financial statements. do not result in change in scope of consolidation Net cash used in financing activities (13,223) (10,632) (124,464) Foreign Currency Translation Adjustments on Cash and Cash Equivalents (7) (3) (66) Net (Decrease) Increase in Cash and Cash Equivalents (142,384) 158,727 (1,340,211) Cash and Cash Equivalents, Beginning of Year 486,024 327,297 4,574,774 Cash and Cash Equivalents, End of Year (Note 3) ¥343,640 ¥486,024 $3,234,563

See notes to consolidated financial statements

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011_9337401373009.inddm_ns_web_9337401373009.indd 18 20-21 2018/09/04 17:40:31 011_9337401373009.indd 19 2018/09/252018/09/04 14:29:3017:40:31 Notes to Consolidated Financial Statements

The Juroku Bank, Ltd. and Consolidated Subsidiaries Year Ended March 31, 2018

1. BASIS OF PRESENTATION OF CONSOLIDATED c. Cash and cash equivalents i. Intangible assets o. Provision for losses from reimbursement of inactive accounts FINANCIAL STATEMENTS For the purpose of the consolidated statement of cash flows, cash and cash Amortization of intangible assets is calculated using the straight-line The provision for losses from reimbursement of inactive accounts, which The accompanying consolidated financial statements have been prepared equivalents represent cash and amounts due from the Bank of Japan. method. are derecognized as liabilities under certain conditions, is provided for in accordance with the provisions set forth in the Japanese Financial d. Trading securities Amortization cost of software for internal use is calculated using the possible losses on future claims of withdrawal based on historical reim- Instruments and Exchange Act and its related accounting regulations Trading securities are stated at fair value and the related unrealized gains straight-line method over the estimated useful life, principally, 5 years. bursement experience. and the Enforcement Regulation for the Banking Law, and in accor- and losses are included in earnings. The cost of trading securities sold is j. Reserve for possible loan losses p. Provision for contingent losses dance with accounting principles generally accepted in Japan (“Japanese determined based on the moving-average method. The Bank implemented a self-assessment system for its asset quality. The Bank provides a provision for contingent losses not covered by other GAAP”), which are different in certain respects as to the application and The quality of all loans is assessed by the related lending division with provisions in an amount deemed necessary based on estimated losses in disclosure requirements of International Financial Reporting Standards. e. Securities Securities other than trading securities are classified and accounted for, a subsequent audit by the asset audit division in accordance with the the future. In preparing these consolidated financial statements, certain reclas- Bank’s policies and rules for self-assessment of asset quality. sifications and rearrangements have been made to the consolidated depending on management’s intent, as follows: 1) held-to-maturity debt q. Income taxes securities, which are expected to be held to maturity with the positive The Bank has established a credit rating system under which the The provision for current income taxes is computed based on the pretax financial statements issued domestically in order to present them in a customers are classified into five categories such as “normal,” “caution,” form which is more familiar to readers outside Japan. In addition, cer- intent and ability to hold to maturity, are reported at amortized cost income included in the consolidated statement of income. The asset and and 2) available-for-sale securities, which are not classified as held-to- “possible bankruptcy,” “virtual bankruptcy” and “legal bankruptcy.” liability approach is used to recognize deferred tax assets and liabili- tain reclassifications have been made in the 2017 consolidated financial The credit rating system is used for the self-assessment of asset quality. statements to conform to the classifications used in 2018. maturity, are reported at fair value with unrealized gains and losses, net ties for the expected future tax consequences of temporary differences of applicable taxes, reported in a separate component of equity. Non- For normal and caution loans, the reserve for possible loan losses between the carrying amounts and the tax bases of assets and liabilities. The consolidated financial statements are stated in Japanese yen, the is calculated based on actual past loss ratios. For loans such as possible currency of the country in which The Juroku Bank, Ltd. (the “Bank”) is marketable available-for-sale securities are stated at cost determined by Deferred taxes are measured by applying currently enacted income tax the moving-average method. bankruptcy, the reserve for possible loan losses is calculated based on an rates to the temporary differences. incorporated and operates. The translations of Japanese yen amounts into amount deemed necessary to cover possible losses on loans considering U.S. dollar amounts are included solely for the convenience of readers For other-than-temporary declines in fair value, securities are re- r. Foreign currency transactions duced to net realizable value by a charge to income. the customer’s solvency and other factors after the estimated fair value outside Japan and have been made at the rate of ¥106.24 to $1, the ap- of the collateral real estate or guaranteed amount has been deducted. Foreign currency assets and liabilities of the Group are translated into proximate rate of exchange at March 31, 2018. Such translations should Securities included in money held in trust for trading purposes are yen equivalents at the exchange rates prevailing at the fiscal year end. stated at fair value, and the related unrealized gains and losses are in- For loans such as virtual bankruptcy or legal bankruptcy, the reserve for not be construed as representations that the Japanese yen amounts could possible loan losses is calculated based upon the loan amount after the s. Derivatives and hedging activities be converted into U.S. dollars at that or any other rate. cluded in earnings. Securities included in money held in trust for other purposes are accounted for by the same method as the above 2) available- estimated fair value of the collateral real estate or guaranteed amount The Bank uses a variety of derivative financial instruments. for-sale securities. has been deducted. Derivative financial instruments and foreign currency transactions 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES For loans to possible bankruptcy customers and a rescheduled loan, are classified and accounted for as follows: (1) all derivatives are recog- a. Consolidation f. Premises and equipment if the exposure to a customer after deducting the estimated value of the nized as either assets or liabilities and measured at fair value, and gains The consolidated financial statements as of March 31, 2018, include the Premises and equipment are stated at cost less accumulated deprecia- collateral or guaranteed amount exceeds a certain amount, the dis- or losses on the derivative transactions are recognized in the consolidated accounts of the Bank and its six (six in 2017) significant subsidiaries, tion. Depreciation of premises and equipment of the Bank, except for counted cash flow method is applied for reserve provision, under which statement of income and (2) for derivatives used for hedging purposes, including Juroku Business Service Co., Ltd., Juroku Research Institute leased assets, is computed using the declining-balance method over the the reserve is determined as the difference between the book value of if the derivatives qualify for hedge accounting because of high correla- Co., Ltd., Juroku Card Co., Ltd., Juroku Lease Co., Ltd., Juroku Com- estimated useful lives of the assets. the loan and its present value of future cash flows discounted using the tion and effectiveness between the hedging instruments and the hedged puter Service Co., Ltd., and Juroku Credit Guarantee Co., Ltd. (together, The range of useful lives is principally from 15 to 50 years for contractual interest rate in the case that future cash flows of the princi- items, gains or losses on the derivatives are deferred until maturity of the “Group”). buildings and from 4 to 20 years for other premises and equipment. pal and interest can be reasonably estimated. the hedged transactions. Under the control concept, those companies in which the Bank, Depreciation of lease assets from finance lease transactions that do Reserve for possible loan losses of consolidated subsidiaries is directly or indirectly, is able to exercise control over operations are fully not deem to transfer ownership of the leased property to the lessee is t. Consumption taxes provided based on historical loan loss experience and estimated collect- The Bank and its domestic consolidated subsidiaries account for con- consolidated. computed using the straight-line method over the leasing period. Re- ability of specific claims. Investments in five (five in 2017) unconsolidated subsidiaries are sidual values of lease assets are the guaranteed values determined in the sumption tax and local consumption tax by the tax-exclusion method. stated at cost. If the equity method of accounting had been applied to lease contracts or zero for assets without such guaranteed value. k. Liability for retirement benefits u. Per share information the investments in these companies, the effect on the accompanying Under certain conditions, such as exchanges of premises and The Bank has a contributory funded defined benefit pension plan, lump- Basic net income per share is computed by dividing net income at- consolidated financial statements would not be material. equipment for similar kinds and sales and purchases resulting from sum payment severance plan for employees and defined contribution tributable to common shareholders by the weighted-average number The excess of the cost of acquisition over the fair value of the net expropriation, Japanese tax laws permit companies to defer the profit pension plan, and certain subsidiaries have lump-sum payment sever- of common shares outstanding for the period, retroactively adjusted for assets of an acquired subsidiary at the date of acquisition is being amor- arising from such transactions by reducing the cost of the assets acquired ance plans for employees and apply the simplified method to state the stock splits. tized over a period of 20 years. or by providing a special reserve in the equity section. The deferred gain liability based on the amount that should be paid if employees retired at Diluted net income per share reflects the potential dilution that All significant intercompany balances and transactions have been on premises and equipment resulting from the reduction of the cost of the consolidated balance sheet date. could occur if securities were exercised or converted into common stock. eliminated in consolidation. All material unrealized profits included in the assets acquired, which is taxable for tax purposes in the future, was The liability for retirement benefits is provided based on projected Diluted net income per share of common stock assumes full conver- assets resulting from transactions within the Group have been elimi- ¥989 million ($9,309 thousand) and ¥999 million as of March 31, 2018 benefit obligations and plan assets at the end of the fiscal year. The pro- sion of the outstanding convertible notes and bonds at the beginning of nated in consolidation. and 2017, respectively. jected benefit obligations are attributed to periods on a benefit formula the year (or at the time of issuance) with an applicable adjustment for basis. Actuarial gains and losses and past service costs that are yet to be The balance sheet date for all consolidated subsidiaries is the end of g. Long-lived assets related interest expense, net of tax, and full exercise of outstanding war- March for each year, which is consistent with the balance sheet date of recognized in profit or loss are recognized within equity (accumulated rants. The Group reviews its long-lived assets for impairment whenever events other comprehensive income), after adjusting for tax effects and are the Group. or changes in circumstances indicate the carrying amount of an asset or Cash dividends per share presented in the accompanying consolidat- recognized in profit or loss over 10 years no longer than the expected ed statement of income are dividends applicable to the respective years b. Business Combination asset group may not be recoverable. An impairment loss is recognized average remaining service period of the employees, starting in the fiscal Business combinations are accounted for using the purchase method. if the carrying amount of an asset or asset group exceeds the sum of the including dividends to be paid after the end of the year, not retroactively year following the occurrence of such differences. adjusted for a reverse stock split. Acquisition-related costs, such as advisory fees or professional fees, are undiscounted future cash flows expected to result from the continued Retirement benefits to directors and Audit & Supervisory Board accounted for as expenses in the periods in which the costs are incurred. use and eventual disposition of the asset or asset group. The impairment On October 1, 2017, the Bank implemented a 1-for-10 reverse stock members of consolidated subsidiaries are provided at the amount that split of common stock. Prior year per share figures have been restated If the initial accounting for a business combination is incomplete by the loss would be measured as the amount by which the carrying amount would be required if all directors and Audit & Supervisory Board end of the reporting period in which the business combination occurs, of the asset exceeds its recoverable amount, which is the higher of the to reflect the impact of the reverse stock split, and to provide data on a members retired at the consolidated balance sheet date based on internal basis comparable to the year ended March 31, 2018. Such restatements an acquirer shall report in its financial statements provisional amounts discounted cash flows from the continued use and eventual disposition policies. for the items for which the accounting is incomplete. During the of the asset or the net selling price at disposition. include calculations regarding the Bank’s weighted-average number l. Stock option of common shares, basic net income per share, diluted net income per measurement period, which shall not exceed one year from the acquisi- h. Land revaluation tion, the acquirer shall retrospectively adjust the provisional amounts The cost of employee stock options is measured based on the fair value share, and net assets per share. The numbers of shares or dividends per Under the “Law of Land Revaluation,” the Bank elected a one-time at the date of grant and recognized as compensation expense over the share are not retroactively adjusted. recognized at the acquisition date to reflect new information obtained revaluation of its own-use land to a value based on real estate appraisal about facts and circumstances that existed as of the acquisition date and vesting period as consideration for receiving goods or services. In the information as of March 31, 1998. consolidated balance sheet, the stock options are presented as stock 3. CASH AND DUE FROM BANKS that would have affected the measurement of the amounts recognized The resulting land revaluation surplus represents unrealized ap- as of that date. Such adjustments shall be recognized as if the account- acquisition rights as a separate component of equity until exercised. Cash and due from banks as of March 31, 2018 and 2017, consisted of preciation of land and is stated, net of income taxes, as a component of the following: ing for the business combination had been completed at the acquisition equity. There was no effect on the consolidated statement of income. m. Leases date. A parent’s ownership interest in a subsidiary might change if the In regard to finance lease, sales and cost of sales are recognized when Thousands of Continuous readjustment is not permitted unless the land value sub- Millions of Yen parent purchases or sells ownership interests in its subsidiary. The carry- sequently declines significantly such that the amount of the decline in lease payments are received. U.S. Dollars ing amount of noncontrolling interest is adjusted to reflect the change in value should be removed from the land revaluation surplus account and All other leases are accounted for as operating leases. 2018 2017 2018 the parent’s ownership interest in its subsidiary while the parent retains related deferred tax liabilities. n. Bonuses to directors and Audit & Supervisory Board members its controlling interest in its subsidiary. Any difference between the fair The carrying amount of the land after the above one-time revalua- Bonuses to directors and Audit & Supervisory Board members of con- Cash ¥ 66,045 ¥ 60,393 $ 621,659 value of the consideration received or paid and the amount by which the tion exceeded the market value by ¥18,003 million ($169,456 thousand) solidated subsidiaries are accrued at the end of the year to which such Due from banks 278,367 425,871 2,620,171 noncontrolling interest is adjusted is accounted for as capital surplus as and ¥18,585 million as of March 31, 2018 and 2017, respectively. bonuses are attributable. Total ¥344,412 ¥486,264 $3,421,830 long as the parent retains control over its subsidiary.

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011_9337401373009.inddm_ns_web_9337401373009.indd 20 22-23 2018/09/04 17:40:31 011_9337401373009.indd 21 2018/09/252018/09/04 14:29:3117:40:31 A reconciliation between the cash and due from banks in the consolidat- Thousands of U.S. Dollars Unrealized gain before deferred tax on available-for-sale securities Accounting Standard for Financial Instruments in the Banking Industry” ed balance sheet and the cash and cash equivalents in the consolidated Unrealized Unrealized Fair includes ¥157 million ($1,478 thousand) and ¥213 million of revalua- issued by the Japanese Institute of Certified Public Accountants. The March 31, 2018 Cost statement of cash flows for the years ended March 31, 2018 and 2017, Gains Losses Value tion gain on available-for-sale securities as of March 31, 2018 and 2017, Bank has rights to sell or pledge accepted commercial bills discounted was as follows: Securities classified as: respectively, which are held by an investment limited partnership and and foreign bills of exchange bought without restrictions. The total fair Thousands of Available-for-sale: similar groups. value of commercial bills discounted and foreign bills of exchange bought Millions of Yen U.S. Dollars Equity securities $ 556,692 $730,582 $16,039 $1,271,235 Investments in and advances to subsidiaries and associated com- included in foreign exchanges as of March 31, 2018 and 2017, were 2018 2017 2018 Debt securities 7,747,044 56,721 9,111 7,794,654 panies as of March 31, 2018 and 2017, were ¥628 million ($5,911 ¥33,129 million ($311,832 thousand) and ¥28,283 million, respectively. Other 2,730,591 11,653 67,715 2,674,529 thousand) and ¥560 million, respectively. Cash and due from banks ¥344,412 ¥486,264 $3,241,830 Held-to-maturity: 7. FOREIGN EXCHANGES 5. MONEY HELD IN TRUST Foreign exchanges as of March 31, 2018 and 2017, consisted of the fol- Due from banks Debt securities 311,192 1,449 1,600 311,041 (772) (240) (7,267) Information regarding money held in trust for trading purposes as of other than the Bank of Japan lowing: March 31, 2018 and 2017, was as follows: Thousands of Cash and cash equivalents ¥343,640 ¥486,024 $3,234,563 Proceeds from sales of available-for-sale securities for the years ended Millions of Yen March 31, 2018 and 2017, consisted of the following: Carrying Amount U.S. Dollars Thousands of 2018 2017 2018 4. TRADING SECURITIES AND SECURITIES Millions of Yen Millions of Yen Trading securities as of March 31, 2018 and 2017, consisted of the fol- U.S. Dollars Assets: March 31, 2018 Proceeds Realized Gains Realized Losses Due from foreign lowing: 2018 2017 2018 ¥5,134 ¥6,137 $48,325 Equity securities ¥ 21,549 ¥4,796 ¥ 124 correspondent account Thousands of Debt securities: Millions of Yen Money held in trust classified Foreign bills of exchange bought 2,245 1,485 21,131 U.S. Dollars National government bonds 17,596 302 — ¥6,000 ¥5,996 $56,476 as trading Purpose Foreign bills of exchange receivable 1,118 1,163 10,523 2018 2017 2018 Local government bonds 34,054 278 — Money held in trust-other 1,012 1,011 9,525 Total ¥8,497 ¥8,785 $79,979 Corporate bonds 4,131 8 75 Total ¥7,012 ¥7,007 $66,001 Liabilities: National government bonds ¥476 ¥746 $4,480 Other 242,098 2,484 5,279 Due to foreign correspondent account ¥ 698 ¥ 942 $ 6,570 Local government bonds 55 44 518 Total ¥319,428 ¥7,868 ¥5,478 ¥531 ¥790 $4,998 6. LOANS AND BILLS DISCOUNTED Foreign bills of exchange payable 183 288 1,723 Loans and bills discounted as of March 31, 2018 and 2017, consisted of Total ¥ 881 ¥1,230 $ 8,293 The Bank records net valuation gains and losses as other operating in- Millions of Yen the following: March 31, 2017 Proceeds Realized Gains Realized Losses come and expenses, respectively. For the years ended March 31, 2018 and Thousands of 8. OTHER ASSETS Equity securities ¥ 15,405 ¥ 3,354 ¥ 773 Millions of Yen 2017, the Bank recorded net valuation losses of ¥3 million ($28 thou- U.S. Dollars Other assets as of March 31, 2018 and 2017, consisted of the following: Debt securities: sand) and net valuation gains of ¥14 million, respectively. Thousands of 2018 2017 2018 Millions of Yen Securities as of March 31, 2018 and 2017, consisted of the following: National government bonds 171,585 7,092 399 U.S. Dollars Local government bonds 49,401 1,175 — Thousands of Bills discounted ¥ 30,884 ¥ 26,798 $ 290,700 2018 2017 2018 Millions of Yen Corporate bonds 36,712 1,592 16 Loans on bills 133,164 137,183 1,253,426 U.S. Dollars Other 666,725 7,116 21,181 2018 2017 2018 Loans on deeds 3,629,079 3,439,208 34,159,253 Accrued income ¥ 4,841 ¥ 5,082 $ 45,567 Total ¥939,828 ¥20,329 ¥22,369 Overdrafts 419,975 419,121 3,953,078 Accounts receivable 9,996 11,324 94,089 Others 2,329 2,148 21,922 Installment receivables 12,861 12,094 121,056 Equity securities ¥ 142,188 ¥ 133,239 $ 1,338,366 Thousands of U.S. Dollars National government bonds 400,163 446,463 3,766,594 Total ¥4,215,431 ¥4,024,458 $39,678,379 Derivative assets 6,387 3,821 60,118 March 31, 2018 Proceeds Realized Gains Realized Losses Other 62,406 25,253 587,406 Local government bonds 233,633 204,279 2,199,106 Equity securities $ 202,833 $45,143 $ 1,167 Corporate bonds 227,368 256,399 2,140,135 “Nonaccrual loans,” which include loans to borrowers in bankruptcy Total ¥96,491 ¥57,574 $908,236 Debt securities: and past due loans, are defined as loans upon which the Bank has dis- Other securities 297,311 298,732 2,798,485 National government bonds 165,625 2,843 — Total ¥1,300,663 ¥1,339,112 $12,242,686 continued the accrual of interest income. Borrowers are generally placed 9. PREMISES AND EQUIPMENT Local government bonds 320,538 2,617 — on nonaccrual status when substantial doubt is deemed to exist as to the Premises and equipment as of March 31, 2018 and 2017, consisted of Corporate bonds 38,884 75 706 ultimate collectability of either the principal or interest and if the loans the following: Unsecured loaned securities which borrowers have the right to sell or Other 2,278,784 23,381 49,690 pledge in the amount of ¥45,389 million ($427,231 thousand) and are past due for a certain period of time or for other reasons. Thousands of Total $3,006,664 $74,059 $51,563 Millions of Yen ¥29,504 million as of March 31, 2018 and 2017, were included in “Loans to borrowers in bankruptcy” represent nonaccrual loans U.S. Dollars national government bonds, respectively. to debtors who are legally bankrupt, which is defined in Article 96, 2018 2017 2018 Information regarding available-for-sale and held-to-maturity secu- In addition, held-to-maturity securities amounting to ¥121 million Paragraph 1, Subparagraphs 3 and 4 of Enforcement Ordinance for the rities as of March 31, 2018 and 2017, was as follows: were reclassified as available-for-sale securities due to a decline in the Corporate Tax Law. Loans to borrowers in legal bankruptcy as of March issuer’s credit worthiness as of March 31, 2017. The effect of these Land ¥46,113 ¥46,319 $434,046 31, 2018 and 2017, were ¥4,534 million ($42,677 thousand) and ¥6,261 Building 13,516 13,553 127,221 Millions of Yen reclassifications on the accompanying consolidated financial statements million, respectively. Unrealized Unrealized Fair Construction in progress 12 138 113 March 31, 2018 Cost was immaterial. “Past due loans” are nonaccrual loans other than loans to borrowers Gains Losses Value The impairment loss on available-for-sale equity securities for the in bankruptcy and loans of which interest payments are deferred in order Other 6,022 6,095 56,683 Securities classified as: year ended March 31, 2018, was ¥15 million ($141 thousand), which to assist the financial recovery of a debtor in financial difficulty. Past due Total ¥65,663 ¥66,105 $618,063 Available-for-sale: consisted of ¥15 million ($141 thousand) of debt securities. loans as of March 31, 2018 and 2017, were ¥62,449 million ($587,811 Equity securities ¥ 59,143 ¥77,617 ¥1,704 ¥135,056 The impairment loss on available-for-sale equity securities for the year thousand) and ¥69,655 million, respectively. The accumulated depreciation of premises and equipment as of March Debt securities 823,046 6,026 968 828,104 ended March 31, 2017, was ¥160 million, which consisted of ¥160 mil- “Accruing loans past due three months or more” are defined as loans 31, 2018 and 2017, amounted to ¥60,342 million ($567,978 thousand) Other 290,098 1,238 7,194 284,142 lion of debt securities. on which principal or interest is past due more than three months. Loans and ¥59,000 million, respectively. Held-to-maturity: Unrealized gain on available-for-sale securities as of March 31, 2018 classified as loans to borrowers in bankruptcy and past due loans are Debt securities 33,061 154 170 33,045 and 2017, consisted of the following: excluded from accruing loans past due three months or more. Accruing 10. CUSTOMERS’ LIABILITIES FOR ACCEPTANCES AND GUARANTEES Thousands of loans past due three months or more as of March 31, 2018 and 2017, Millions of Yen All contingent liabilities arising from acceptances and guarantees are Millions of Yen U.S. Dollars were ¥246 ($2,315 thousand) million and nil, respectively. Unrealized Unrealized Fair reflected in acceptances and guarantees. As a contra account, the cus- March 31, 2017 Cost 2018 2017 2018 “Restructured loans” are defined as loans in which the Group is Gains Losses Value providing financial support to a borrower by a reduction of interest rates, tomers’ liabilities for acceptances and guarantees are presented as assets, representing the Bank’s right of indemnity from applicants. Securities classified as: Unrealized gain before deferral of interest payments, extension of maturity dates, or reduction Available-for-sale: of the face or maturity amount of the debt or accrued interest. Loans The Enforcement Ordinance of the Banking Law was revised on deferred tax on: April 17, 2007, and effective from the fiscal years beginning on and after Equity securities ¥ 60,035 ¥67,485 ¥1,501 ¥126,019 Available-for-sale securities ¥75,172 ¥68,300 $707,567 classified as loans to borrowers in bankruptcy, past due loans and accru- ing loans past due three months or more are excluded from restructured April 1, 2006. The Bank offsets customer’s liabilities for acceptance and Debt securities 882,461 9,643 1,953 890,151 Money held in trust-other 12 11 113 guarantees with acceptance and guarantees of ¥33,176 million ($312,274 Other 295,170 2,409 7,997 289,582 loans. Restructured loans as of March 31, 2018 and 2017, were ¥3,579 Deferred tax liabilities (21,983) (19,914) (206,918) million ($33,688 thousand) and ¥6,799 million, respectively. thousand) and ¥17,360 million arising from guarantees of private place- Held-to-maturity: Unrealized gain on available- ment securities as of March 31, 2018 and 2017, respectively. Debt securities 16,990 138 67 17,061 The total amount of loans to borrowers in bankruptcy, past due for-sale securities before 53,201 48,397 500,762 loans, accruing loans past due three months or more and restructured interest adjustments loans as of March 31, 2018 and 2017, were ¥70,808 million ($666,491 Noncontrolling interests (478) (387) (4,499) thousand) and ¥82,715 million, respectively. Unrealized gain on available- ¥52,723 ¥48,010 $496,263 Bills discounted are accounted for as financing transactions in ac- for-sale securities cordance with “Treatment of Accounting and Auditing in Applying

22 23

011_9337401373009.inddm_ns_web_9337401373009.indd 22 24-25 2018/09/04 17:40:31 011_9337401373009.indd 23 2018/09/252018/09/04 14:29:3117:40:31 11. ASSETS PLEDGED 13. BORROWED MONEY AND LEASE OBLIGATION 15. OTHER LIABILITIES (3) Reconciliation between the liability recorded in the consolidated bal- Assets pledged as collateral and their relevant liabilities as of March 31, Borrowed money and lease obligation as of March 31, 2018 and 2017, Other liabilities as of March 31, 2018 and 2017, consisted of the following: ance sheet and the balances of defined benefit obligation and plan assets as of March 31, 2018 and 2017, was as follows: 2018 and 2017, were as follows: consisted of the following: Thousands of Millions of Yen Thousands of Thousands of U.S. Dollars Thousands of Millions of Yen Millions of Yen Millions of Yen U.S. Dollars U.S. Dollars 2018 2017 2018 U.S. Dollars 2018 2017 2018 2018 2017 2018 2018 2017 2018 Assets pledged as collateral: Domestic exchange settlement ¥ 18 ¥ 59 $ 169 Funded defined benefit Securities ¥187,641 ¥195,717 $1,766,199 Borrowings due serially to November account, credit (*) ¥40,646 ¥40,366 $382,587 Lease receivables and 2022 with weighted average interest rates ¥47,775 ¥46,744 $449,689 Income taxes payable 2,817 535 26,516 obligation — 49 — investments in leases of 0.69 % in 2018 and 0.57% in 2017 Accrued expenses 3,145 3,655 29,603 Plan assets (44,171) (41,578) (415,767) Other assets 2,008 3,746 18,901 Lease obligation 33 79 311 Deferred income 14,420 13,291 135,730 (3,525) (1,212) (33,180) Unfunded defined benefit Total ¥189,649 ¥199,512 $1,785,100 Employees’ deposits 2,887 2,934 27,174 6,704 6,670 63,102 Relevant liabilities to above assets: Weighted average interest rates of lease obligation are not represented Derivative liabilities 4,785 4,829 45,040 obligation Deposits ¥65,213 ¥73,107 $613,827 because the lease obligation is disclosed on the balance sheet without Accounts payable 8,194 7,564 77,127 Net liability arising from ¥ 3,179 ¥ 5,458 $ 29,922 Payables under repurchase deducting the interest portion which is included in the amount of the Other 13,645 12,145 128,436 defined benefit obligation 98,874 54,724 930,666 agreements lease obligation. Total ¥49,911 ¥45,012 $469,795 Annual maturities of borrowings as of March 31, 2018 and 2017, Payables under securities Thousands of — 50,732 — were as follows: Millions of Yen lending Transactions (*) The domestic exchange settlement account consisted of outstanding U.S. Dollars As of March 31, 2018, Thousands of remittance bills from other banks and/or collection bills for which the Borrowed money 21,899 22,148 206,128 Millions of Yen 2018 2017 2018 Total ¥185,986 ¥200,711 $1,750,621 for the years ending March 31 U.S. Dollars Bank has received notices for payment from other banks which have not 2019 ¥32,564 $306,513 been settled. Liability for retirement benefits In addition, the following assets were pledged or deposited with respect 2020 6,071 57,144 ¥6,704 ¥6,670 $63,102 16. RETIREMENT AND PENSION PLANS for employees to foreign exchange settlements and derivatives as of March 31, 2018 2021 4,904 46,160 Asset for retirement benefits for and 2017: 2022 3,233 30,431 The Bank has a contributory funded defined benefit pension plan, lump- (3,525) (1,212) (33,180) sum payment severance plan for employees and defined contribution employees Thousands of 2023 1,003 9,441 Net liability arising from defined Millions of Yen pension plan, and certain subsidiaries have lump-sum payment severance ¥3,179 ¥5,458 $29,922 U.S. Dollars 2024 and thereafter — — benefit obligation Total ¥47,775 $449,689 plans for employees and apply the simplified method to state the liabil- 2018 2017 2018 ity based on the amount that would be paid if employees retired at the (4) The components of net periodic benefit costs for the years ended As of March 31, 2017, consolidated balance sheet date. The Bank contributed certain assets to Securities ¥55,027 ¥66,162 $517,950 Millions of Yen the employee retirement benefit trust for the Bank’s contributory funded March 31, 2018 and 2017, were as follows: Other assets — 7 — for the years ending March 31 defined benefit pension plan and the assets in this trust are qualified as Thousands of Total ¥55,027 ¥66,169 $517,950 2018 ¥32,644 Millions of Yen 2019 5,865 plan assets. U.S. Dollars 2018 2017 2018 Additionally, initial margins of futures markets, cash collateral received 2020 4,071 2021 2,903 (1) The changes in defined benefit obligation for the years ended March for financial instruments liabilities, guarantee deposits and initial mar- 31, 2018 and 2017, were as follows: Service cost ¥1,967 ¥2,020 $18,515 gins of Central Counterparty included in other assets were as follows: 2022 1,233 2023 and thereafter 28 Thousands of Interest cost 160 158 1,506 Thousands of Millions of Yen Millions of Yen Total ¥46,744 U.S. Dollars Expected return on plan assets (1,038) (995) (9,771) U.S. Dollars 2018 2017 2018 Recognized actuarial losses 1,252 1,247 11,785 2018 2017 2018 Borrowings include subordinated loans of the Bank, which amounted to Net periodic benefit costs ¥2,341 ¥2,430 $22,035 nil as of March 31, 2018 and 2017, respectively. Balance at beginning of year ¥47,036 ¥51,412 $442,733 Initial margins of future ¥ 964 ¥ 897 $ 9,074 Annual maturities of lease obligation as of March 31, 2018 and Current service cost 1,967 2,020 18,515 (5) Amounts recognized in other comprehensive income (before income markets 2017, were as follows: Interest cost 160 158 1,506 tax effect) in respect of defined retirement benefit plans for the years Cash collateral received for Actuarial losses 348 284 3,276 ended March 31, 2018 and 2017, were as follows: 3,075 1,810 28,944 As of March 31, 2018, Thousands of financial instruments liabilities Millions of Yen Benefits paid (2,161) (2,175) (20,341) Thousands of for the years ending March 31 U.S. Dollars Millions of Yen Guarantee deposits 2,044 2,094 19,239 2019 ¥33 $311 Decrease due to the transfer U.S. Dollars to a defined contribution — (4,663) — 2020 — — 2018 2017 2018 Initial margins of Central pension plan 46,000 — 432,982 2021 — — Counterparty Balance at end of year ¥47,350 ¥47,036 $445,689 2022 — — Actuarial gains ¥2,567 ¥3,035 $24,162 Total ¥52,083 ¥4,801 $490,239 2023 — — Total ¥2,567 ¥3,035 $24,162 Total ¥33 $311 (2) The changes in plan assets for the years ended March 31, 2018 and 12. DEPOSITS 2017, were as follows: (6) Amounts recognized in accumulated other comprehensive income Deposits as of March 31, 2018 and 2017, consisted of the following: As of March 31, 2017, Thousands of (before income tax effect) in respect of defined retirement benefit plans Millions of Yen Millions of Yen Thousands of for the years ending March 31 U.S. Dollars as of March 31, 2018 and 2017, were as follows: Millions of Yen U.S. Dollars 2018 ¥46 2018 2017 2018 Thousands of Millions of Yen 2018 2017 2018 2019 33 U.S. Dollars 2020 — Balance at beginning of year ¥41,578 ¥44,546 $391,359 2018 2017 2018 Current deposits ¥ 353,286 ¥ 324,672 $ 3,325,358 2021 — Expected return on plan 1,038 995 9,771 Ordinary deposits 2,615,734 2,415,425 24,620,990 2022 — assets Unrecognized actuarial losses ¥667 ¥3,235 $6,278 Deposits at notice 32,132 39,204 302,447 Total ¥79 Actuarial gains 1,663 1,440 15,653 Total ¥667 ¥3,235 $6,278 Savings deposits 90,428 91,081 851,167 Contributions from the 1,574 463 14,816 Time deposits 2,286,153 2,386,548 21,518,760 14. BONDS employer Other deposits 65,241 84,849 614,091 Bonds as of March 31, 2018 and 2017, consisted of the following: Benefits paid (1,682) (1,591) (15,832) Total ¥5,442,974 ¥5,341,779 $51,232,813 Thousands of Decrease due to the transfer Millions of Yen U.S. Dollars to a defined contribution — (4,275) — 2018 2017 2018 pension plan Balance at end of year ¥44,171 ¥41,578 $415,767 Unsecured Yen subordinated ¥— ¥10,000 $— bonds due December 2022 (*) Total ¥— ¥10,000 $—

(*) The interest rates of the bonds are 1.01% for the period from Decem- ber 22, 2012 to December 21, 2017 and the six-month Euroyen London InterBank Offered Rate plus 2.20% for the period from December 22, 24 2017 to December 21, 2022. 25

011_9337401373009.inddm_ns_web_9337401373009.indd 24 26-27 2018/09/04 17:40:32 011_9337401373009.indd 25 2018/09/252018/09/04 14:29:3117:40:32 (7) Plan assets 18. EQUITY The stock option activity is as follows: 22. GENERAL AND ADMINISTRATIVE EXPENSES (a) Components of plan assets Japanese banks are subject to the Companies Act of Japan (the “Compa- 2013 2014 2015 2016 2017 General and administrative expenses for the years ended March 31, 2018 Plan assets consisted of the following: nies Act”). The significant provisions in the Companies Act that affect Stock Stock Stock Stock Stock and 2017, consisted of the following: 2018 2017 financial and accounting matters are summarized below: Option Option Option Option Option Thousands of Millions of Yen (a) Dividends Year Ended March 31, 2018 U.S. Dollars Debt investments 28% 30% Under the Companies Act, companies can pay dividends at any time Non-vested 2018 2017 2018 Equity investments 42 44 during the fiscal year in addition to the year-end dividend upon resolu- General account for life insurance 21 22 tion at the shareholders’ meeting. Additionally, for companies that meet March 31, 2017—Outstanding ——— 4,087.5 — Salaries and wages ¥21,917 ¥22,608 $206,297 Others 9 4 certain criteria, the Board of Directors may declare dividends (except Granted ———— 12,350 Other 32,716 33,528 307,944 Total 100% 100% for dividends-in-kind) at any time during the fiscal year if the company has prescribed so in its articles of incorporation. However, the Bank Canceled ————— Total ¥54,633 ¥56,136 $514,241 cannot do so because it does not meet the criteria. Semiannual interim Vested ——— 4,087.5 9,262.5 (*1) The retirement benefit trust that contributed to the pension plan is dividends may also be paid once a year upon resolution by the Board March 31, 2018—Outstanding ———— 3,087.5 23. OTHER EXPENSE included in the plan assets and constitutes 17% of the total plan assets of Directors if the articles of incorporation of the company so stipulate. Other expense for the years ended March 31, 2018 and 2017, consisted as of March 31, 2018 and 2017. The Companies Act provides certain limitations on the amounts avail- Vested of the following: able for dividends or the purchase of treasury stock. The limitation is Thousands of (b) Method of determining the expected rate of return on plan assets Millions of Yen defined as the amount available for distribution to the shareholders, but March 31, 2017—Outstanding 5,000 10,280 6,480 12,262.5 — U.S. Dollars The expected rate of return on plan assets is determined considering the amount of net assets after dividends must be maintained at no less Vested ——— 4,087.5 9,262.5 2018 2017 2018 the current and future asset portfolio and the long-term rates of return than ¥3 million. Exercised 740 1,260 900 3,630 — which are expected currently and in the future from the variety of plan (b) Treasury stock and treasury stock acquisition rights Canceled ———120 — Loss on sales of stock and other assets in the asset portfolio. ¥ 340 ¥1,026 $ 3,200 The Companies Act also provides for companies to purchase treasury March 31, 2018—Outstanding 4,260 9,020 5,580 12,600 9,262.5 securities stock and dispose of such treasury stock by resolution of the Board Other 1,446 1,608 13,611 (8) Assumptions used for the years ended March 31, 2018 and 2017, of Directors. The amount of treasury stock purchased cannot exceed Exercise price ¥ 1 ¥ 1 ¥ 1 ¥ 1 ¥ 1 Total ¥1,786 ¥2,634 $16,811 were set forth as follows: the amount available for distribution to the shareholders which is ($0.01) ($0.01) ($0.01) ($0.01) ($0.01) 2018 2017 determined by a specific formula. Under the Companies Act, stock Average stock price at exercise ¥3,460 ¥3,460 ¥3,460 ¥3,477 — 24. INCOME TAXES acquisition rights are presented as a separate component of equity. The ($32.57) ($32.57) ($32.57) ($32.73) — The Bank and its subsidiaries are subject to Japanese national and local Discount rate: Companies Act also provides that companies can purchase both treasury Fair value price at grant date ¥3,650 ¥3,200 ¥4,640 ¥2,390 ¥3,170 income taxes which, in the aggregate, resulted in a normal effective Lump-sum payment 0.084% 0.084% stock acquisition rights and treasury stock. Such treasury stock acquisi- ($34.36) ($30.12) ($43.67) ($22.50) ($29.84) statutory tax rate of approximately 30.14% for the years ended March Pension plan 0.382% 0.382% tion rights are presented as a separate component of equity or deducted 31, 2018 and 2017. Expected rate of return on plan assets 3.000% 3.000% directly from stock acquisition rights. Note: Effective October 1, 2017, the Bank implemented a 1-for-10 The tax effects of significant temporary differences and tax loss car- Other than above, the Japanese Banking Law provides that an amount reverse stock split of common stock, and the number of shares, ryforwards, which result in deferred tax assets and liabilities as of March The amount to be paid to defined contribution pension plan was ¥375 equal to at least 20% of the aggregate amount of cash dividends and cer- average stock price at exercise and fair value price at grant date are 31, 2018 and 2017, were as follows: million ($3,530 thousand) and ¥ 356 million for the years ended March tain other cash payments which are made as an appropriation of retained presented on a post-reverse stock split basis. Thousands of Millions of Yen 31, 2018 and 2017. earnings applicable to each fiscal period shall be set aside as a legal reserve U.S. Dollars until the total additional paid-in capital and legal reserve equals 100% The Assumptions Used to Measure the Fair Value of the 2017 Stock Option 17. ASSET RETIREMENT OBLIGATIONS 2018 2017 2018 of stated capital. The amount of total additional paid-in capital and legal Estimate method: Black-Scholes option pricing model Deferred tax assets: Asset retirement obligations are recognized for obligations of restoring reserve which exceeds 100% of stated capital can be transferred to retained Volatility of stock price: 31.781% Reserve for possible loan losses ¥ 6,027 ¥ 6,779 $ 56,730 leased buildings, such as branch premises, to their original state, based earnings by resolution of the shareholders, which may be available for Estimated remaining outstanding period: 5.1 years Liability for retirement benefits on the real estate lease contracts and asbestos removal costs. dividends. The Bank’s legal reserve amount, which is included in retained 2,671 3,304 25,141 Estimated dividend: ¥7 ($0.07) per share for employees Asset retirement obligations are calculated based on the estimated earnings, totals ¥20,155 million ($189,712 thousand) and ¥20,155 mil- Risk free interest rate: (0.052)% available periods of 10 to 47 years depending on the expected useful lion as of March 31, 2018 and 2017, respectively. Write-down of securities 2,198 2,220 20,689 Depreciation 1,284 1,311 12,086 lives of buildings using discount rates from 1.395% to 2.461%. On October 1, 2017, the Bank implemented a 1-for-10 reverse stock 20. OTHER OPERATING INCOME The changes in asset retirement obligations, which are included in split of common stock based on the resolution of the annual general meet- Other 2,341 2,077 22,035 Other operating income for the years ended March 31, 2018 and 2017, Less: Valuation allowance (3,456) (4,502) (32,530) other liabilities, for the years ended March 31, 2018 and 2017, were as ing of shareholders held on June 23, 2017. consisted of the following: follows: Total 11,065 11,189 104,151 Thousands of Deferred tax liabilities: Thousands of 19. STOCK OPTIONS Millions of Yen Millions of Yen U.S. Dollars Unrealized gain on U.S. Dollars The stock options outstanding as of March 31, 2018, are as follows: (21,983) (19,914) (206,918) 2018 2017 2018 available- for-sale securities 2018 2017 2018 Number of Stock Persons Date of Exercise Exercise Gain on contribution of Options Option Granted Grant Price Period Gains on sales of Japanese available-for- sale securities to (1,018) (1,018) (9,582) Balance at beginning of year ¥193 ¥195 $1,817 Granted ¥ 1,912 ¥16,562 $ 17,997 government bonds and other employees’ retirement benefit trusts Reconciliation associated 2013 Stock ¥ 1 From July 24, 2013 4 4 37 11 directors 12,620 shares 2013.7.23 Income on lease transaction Other (542) (582) (5,102) with passage of time Option ($0.01) to July 23, 2043 20,987 20,588 197,543 and installment receivables Total (23,543) (21,514) (221,602) Decrease due to fulfillment of 2014 Stock ¥ 1 From July 24, 2014 — (6) — 11 directors 15,500 shares 2014.7.23 Other 2,111 2,199 19,870 Net deferred tax assets ¥(12,478) ¥(10,325) $ (117,451) asset retirement obligations Option ($0.01) to July 23, 2044 Total ¥25,010 ¥39,349 $235,410 Balance at end of year ¥197 ¥193 $1,854 2015 Stock ¥ 1 From July 24, 2015 10 directors 9,600 shares 2015.7.23 A reconciliation between the normal effective statutory tax rate and Option ($0.01) to July 23, 2045 21. OTHER INCOME the actual effective tax rate reflected in the accompanying consolidated 7 directors 2016 Stock ¥ 1 From July 23, 2016 Other income for the years ended March 31, 2018 and 2017, consisted statement of income for the years ended March 31, 2018 and 2017, was 8 executive 16,350 shares 2016.7.22 Option ($0.01) to July 22, 2046 of the following: as follows: officers 2018 2017 7 directors Thousands of 2017 Stock ¥ 1 From July 22, 2017 Millions of Yen 8 executive 12,350 shares 2017.7.21 U.S. Dollars Option ($0.01) to July 21, 2047 2018 2017 2018 Normal effective statutory tax rate 30.14% 30.14% officers Expenses not deductible for income tax purposes 0.76 0.82 Gain on sales of stock and Income not taxable for income tax purposes (1.51) (1.41) ¥5,957 ¥3,772 $56,071 other securities Per capita tax 0.57 0.59 Reversal for possible loan losses 642 3,302 6,043 Net change in valuation allowance (7.74) (6.87) The effect of variance with the future Other 2,234 2,822 21,028 0.18 0.05 Total ¥8,833 ¥9,896 $83,142 effective statutory tax rate Other – net 0.73 0.87 Actual effective tax rate 23.13% 24.19%

26 27

011_9337401373009.inddm_ns_web_9337401373009.indd 26 28-29 2018/09/04 17:40:32 011_9337401373009.indd 27 2018/09/252018/09/04 14:29:3117:40:32 25. LEASES Operating leases Deposits and borrowed money hold interest risk and cash flow risk Market risk management (foreign exchange risk and interest rate risk) Finance leases (Lessee) (liquidity risk). Cash flow risk refers to the risk that securing necessary The Group considers interest rate risk, currency risk and the risk of (Lessee) The minimum rental commitments under noncancelable operating financing becomes difficult or significant unfavorable financing condi- change in prices as the main market risks and institutes a market risk A subsidiary leases certain premises. leases as of March 31, 2018 and 2017, were as follows: tions result in recording of loss due to a mismatch of periods between management policy to manage the risks properly to avoid a reduction in operations and financing and unexpected outflows of money. Derivative the value of assets and losing credit. The Group also institutes market There was no rental expense including lease payments under the Thousands of finance leases for the years ended March 31, 2018 and 2017. Millions of Yen transactions related to interest are comprised of interest-rate swap agree- risk management regulations according to the market risk manage- U.S. Dollars ments, cap agreements, floor agreements, and interest futures. ment policy to clarify the identification of market risk, the role of the 2018 2017 2018 Derivative transactions related to currency are comprised of ex- department in charge, the method of evaluation and monitoring and the (Lessor) change contracts, non-deliverable forwards (NDF), currency swap methods for controlling and reducing market risk. A subsidiary leases certain equipment and other assets. Due within one year ¥ 296 ¥ 301 $ 2,786 agreements, and currency option contracts. Derivative transactions Under integrated risk management, the Group allocates risk capital The net investments in leases as of March 31, 2018 and 2017, were Due after one year 2,746 3,129 25,847 related to securities are comprised of bond futures, options on bond to each business (deposit, loan, investment securities and other securi- as follows: Total ¥3,042 ¥3,430 $28,633 futures, OTC bond options, stock index futures, options on stock index ties) and establishes a cap on the investment amount and a maximum Thousands of futures, and individual security options. loss amount and matters to be discussed (level of loss to be re-examined). Millions of Yen U.S. Dollars (Lessor) The Group utilizes derivative transactions to meet customer needs and The Group handles market transactions within these risk limits expedi- 2018 2017 2018 Expected future rental revenues under operating leases as of March 31, to control risk so that interest risk, risk of changes in prices, and foreign tiously and effectively. With regard to these risks, the Risk Management 2018 and 2017 were as follows: currency exchange risk are not excessive. In trading transactions, the Division manages and reports monthly to the Integrated Risk Manage- Thousands of Group utilizes derivative transactions to earn a profit and to accumulate ment Council and quarterly to the Board of Directors meetings and Gross lease receivables ¥49,861 ¥47,465 $469,324 Millions of Yen Unguaranteed residual values 1,571 1,534 14,787 U.S. Dollars the know-how related to the transactions and understand market trends. discusses necessary actions. Deferred interest income (4,200) (4,364) (39,533) 2018 2017 2018 The derivative transactions the Group utilizes are exposed to inter- Regarding derivative transactions, the Group follows internal regu- Total ¥47,232 ¥44,635 $444,578 est risk, currency exchange risk, the risk of change in prices, and credit lations and policies. The market-risk-management department (middle Due within one year ¥ 509 ¥ 484 $ 4,791 risk. In utilizing derivative transactions, the Group performs effec- office) and office-work department (back office) manage and monitor Maturities of lease receivables for finance leases that were deemed to Due after one year 809 835 7,615 tive covering of transactions to meet customers’ needs, and in trading the balance, fair value, profit and loss and measurement of risk of the transfer ownership of the leased assets to the lessee are as follows: Total ¥1,318 ¥1,319 $12,406 transactions, the Group preliminarily establishes a risk limit to avoid transactions and report to top-management regularly to ensure mutual exposing the Group to an excessive degree of market risk. Transac- supervision of risks. Especially in trading transactions, the market- As of March 31, 2018, Thousands of Millions of Yen tions such as listed futures are exposed to limited credit risk and OTC risk-management department (middle office) manages the positions, for the years ending March 31 U.S. Dollars 26. FINANCIAL INSTRUMENTS AND RELATED transactions such as interest swaps are assumed to have low risk since the measurement of risk and application for loss cut rule closely. 2019 ¥1,051 $ 9,893 DISCLOSURES counterparties are comprised of highly credible financial institutions and The Group holds financial instruments which are exposed to market 2020 947 8,914 (1) Group policy for financial instruments companies. risks (e.g. interest-rate risk, price-volatility risk and exchange risk) such 2021 901 8,481 The Group provides banking services and comprehensive financial ser- Some of the derivatives utilized to control the risks from securities as loans and bills discounted, securities, deposits, negotiable deposits, 2022 650 6,118 vices including a leasing business. The Group meets the needs of local are recorded on the basis of hedge accounting in accordance with JICPA borrowed money and corporate bonds. To manage these market risks, 2023 421 3,963 business through providing various products and services in the banking Accounting Practice Committee Report No. 14, “Practical Guideline for the Group calculates VaR, which is used for quantitative analysis. 2024 and thereafter 716 6,739 services, lending services, trading of securities, securities investments Accounting for Financial Instruments”. The Group calculates VaR of private placement bonds, borrowed and other financial services such as a derivatives business. The Group Total ¥4,686 $44,108 (3) Risk management for financial instruments money and corporate bonds which are exposed to interest-rate risk by has aligned its operations with local personnel and businesses and raises the variance-covariance method (six months holding period with confi- As of March 31, 2017, funds from deposits from customers, which are low cost and stable. The Integrated Risk Millions of Yen dence interval of 99%, observation period one year). The VaR of these for the years ending March 31 Group also raises funds by borrowing. The Group defines integrated risk management policies and regulations, financial instruments amounted to ¥10,597 million (99,746$ thousand) 2018 ¥ 866 As for loans and bills discounted in the money management system, and strengthens integrated risk management to ensure the soundness of and ¥20,289 million in aggregate as of March 31, 2018 and 2017, 2019 727 the Group finances local companies based on their capital demands and management. respectively. 2020 595 individuals mainly for home mortgages. As its main resources are bank The Group monitors various risks holistically including measure- The Group calculates VaR of investment securities which are 2021 583 deposits from customers, the Group aims to ensure the soundness of the ment by statistical methods and aims to control risks within the range exposed to price-volatility risk by the variance-covariance method (six assets through appropriate credit decisions and credit rating by under- 2022 370 of management vitality. Specifically, the Group allocates risk capital months holding period with confidence interval of 99%, observation standing the current credit status and managing the credit portfolio to 2023 and thereafter 471 to credit risk, market risk, and operational risk based on Value at Risk period one year). The VaR of these financial instruments amounted to prevent concentrations in specific customers or industries. In marketable (“VaR”) calculations according to assumptions about the market fluctua- Total ¥3,612 ¥24,966 million ($234,996 thousand) and ¥38,513 million in aggregate securities, considering the nature that it is engaged in excess fund man- tion rate and its half year business plan. In each operational division, the as of March 31, 2018 and 2017, respectively. agement relating to lending services and its responsibility as a bank to Group aims to control risk and obtain returns within the range of risk In addition, the Group calculates VaR of securities, excluding Maturities of investment in leases for finance leases that were deemed provide settlement services, the Group focuses on running a fund based capital. Integrated risk is managed by the Risk Management Division not to transfer ownership of the leased assets to the lessee are as follows: investment securities, which are exposed to interest-rate risk or the price on public bonds, which is superior in security and liquidity. To build up and is reported monthly to the Integrated Risk Management Council volatility risk by the variance-covariance method (six months holding As of March 31, 2018, Thousands of a portfolio that is less subject to rising interest rates, the Group invests Millions of Yen and quarterly to the Board of Directors meetings. Necessary actions such period with confidence interval of 99%, observation period one year). for the years ending March 31 U.S. Dollars in risk assets such as securities whose values are expected to be less cor- as risk control are taken promptly. The VaR of these financial instruments amounted to ¥21,262 million 2019 ¥13,129 $123,579 related with bonds. Credit Risk Management ($200,132 thousand) and ¥23,103 million in aggregate as of March 31, 2020 11,040 103,916 The Group executes derivative transactions to fund and invest The Group defines credit risk management policy and rules such as 2018 and 2017, respectively. 2021 9,024 84,940 capital to meet the various needs of its customers as well as to meet its credit risk management regulation to understand, manage and take ac- The Group compares VaR calculated by the formula with the actual 2022 6,850 64,476 own needs. In trading transactions, the Group avoids excessive risk by tions on credit risk appropriately. fluctuation of realized gains and losses to verify that the calculated VaR 2023 4,710 44,333 restricting the type of transactions and limiting the volume of transac- In screening requests for loans, the Group clearly separates the cred- reflects market risks with a high degree of accuracy. 2024 and thereafter 5,108 48,080 tions. Also, the Group will not trade a particular investment if its fair it department from the operating department and the Group performs However, VaR might not reflect market risks in circumstances such value is volatile compared to that of the underlying assets (i.e. high Total ¥49,861 $469,324 strict examination by the type of business. Also, the Group analyzes if as unforeseen wide fluctuations in market circumstances because VaR leverage-effect transaction). repayment resources are ensured and reasonably secured on individual reflects a certain amount of market risks calculated statistically based on As of March 31, 2017, (2) Nature and extent of risks arising from financial instruments loans based on the purpose of the loan, business plans and investment historical fluctuation. Millions of Yen for the years ending March 31 The loans and bills discounted are to general business enterprises, indi- effects. Liquidity risk management 2018 ¥12,449 viduals, and local public bodies, and there is a risk (credit risk) that the For credit portfolio management, the Group aims to prevent con- As to liquidity risk, the Group defines liquidity risk management poli- 2019 10,685 value of loaned money is reduced by financial deterioration of the bor- centrations in particular customers or industries and ensure profits to cies and liquidity risk management regulations, and aims to manage 2020 8,446 rower and a risk (interest risk) of losses due to changes in interest rates. meet credit costs. stable cash flows. Also, to be prepared for unforeseeable circumstances, 2021 6,430 In securities, the Group holds domestic bonds which are comprised In addition, in order to improve credit risk, the Group seeks to the Group defines a contingency plan for liquidity risks and addresses 2022 4,267 mainly of public bonds such as government bonds and local govern- implement management and business restructuring for customers expe- them in a timely manner. ment bonds, foreign securities, which are comprised of mainly US riencing difficult business conditions. 2023 and thereafter 5,188 (4) Fair values of financial instruments Total ¥47,465 Treasury, stocks, investment trusts, and investment partnerships and so Regarding credit risk management, the Group defines a credit forth for investment purposes. Also, the Group holds certain domestic rating system where the Group evaluates the degree of credit risk by an Fair values of financial instruments are based on quoted prices in active bonds for held-to-maturity purposes. In trading securities, the Group integrated scale objectively and makes arrangements to reevaluate credit markets. If quoted prices are not available, other rational valuation holds domestic bonds for trading. These items have interest risk, risk of ratings close to fiscal year end or when there are any changes in credit techniques are used instead. Please see Note 28 for the details of the fair changes in price, credit risk, and market liquidity risk. Market liquidity status. value of derivatives. Fair values are calculated based on certain assump- risk represents the risk that market trades cannot be performed due to As for the level of credit risk and degree of concentration of credit tions; therefore, fair values may vary according to the assumptions used. market turmoil and that the Group may suffer losses due to significantly granting, the Risk Management Division manages credit risk, reports unfavorable financing conditions. monthly to the Integrated Risk Management Council and quarterly to management and discusses necessary actions.

28 29

011_9337401373009.inddm_ns_web_9337401373009.indd 28 30-31 2018/09/04 17:40:32 011_9337401373009.indd 29 2018/09/252018/09/04 14:29:3217:40:32 (a) Fair value of financial instruments Assets Derivatives Millions of Yen Cash and due from banks Due after One Due after Five Millions of Yen Information regarding the fair value for derivatives is included in Note 28. Due in One Due after The carrying amount of cash and due from banks with no maturities March 31, 2017 Year through Years through Carrying Unrealized (b) Financial instruments whose fair value cannot be reliably determined Year or Less Ten Years March 31, 2018 Fair Value represents the fair value because the fair value approximates such carry- Five Years Ten Years Amount Gains/Losses Carrying amount ing amount. Deposits ¥4,717,017 ¥624,753 ¥9 — Cash and due from banks ¥344,412 ¥344,412 — Thousands of Millions of Yen Negotiable certificates of deposit 97,679 ——— Trading securities 531 531 — U.S. Dollars Trading securities Payables under repurchase Money held in trust 7,012 7,012 — For securities such as bonds that are held for trading, the fair value is 2018 2017 2018 54,724 ——— Securities agreements determined based on the prices quoted by the exchange or the financial Total ¥4,869,420 ¥624,753 ¥9 — Held-to-maturity securities 33,061 33,045 ¥ (16) institutions from which these securities are purchased. Unlisted equity securities ¥ 7,131 ¥ 7,220 $ 67,122 Available-for-sale securities 1,247,302 1,247,302 — Investments in unconsolidated 623 555 5,864 Thousands of U.S. Dollars Loans and bills discounted 4,215,431 Money held in trust subsidiaries Due after One Due after Five Less: Reserve for possible For securities that are part of trust property in an independently man- Others 12,546 8,595 118,090 Due in One Due after (23,484) March 31, 2018 Year through Years through loan losses aged monetary trust with the primary purpose to manage securities, the Total ¥20,300 ¥16,370 $191,076 Year or Less Ten Years Five Years Ten Years Loans and bills discounted – net 4,191,947 4,202,858 10,911 fair value of equity securities is determined based on the prices quoted Total ¥5,824,265 ¥5,835,160 ¥10,895 by the exchange and the fair value of bonds is determined based on the Since the fair values of unlisted stocks cannot be reliably determined, Cash and due from banks $ 2,620,162 ——— Deposits ¥5,442,974 ¥5,443,610 ¥ 636 prices quoted by the exchange or the financial institutions from which their fair values are not disclosed. Securities: Negotiable certificates of deposit 49,600 49,600 — they are purchased. Information on money held in trust by classification The impairment losses on unlisted stocks for the years ended March Held-to-maturity securities: Payables under repurchase is included in Note 5, “Money Held in Trust.” 31, 2018 and 2017, were ¥116 million ($1,092 thousand) and ¥6 mil- Debt securities: 98,874 98,874 — agreements lion, respectively. Corporate bonds 52,476 $ 220,369 $ 38,488 — Total ¥5,591,448 ¥5,592,084 ¥ 636 Securities Available-for-sale securities Derivatives to which hedge The fair value of equity securities is determined based on the prices (5) Maturity analysis for financial assets, securities and financial liabili- with contractual maturities: ¥ 1,603 ¥ 1,603 — accounting is not applied quoted by the exchange and the fair value of bonds is determined based ties with contractual maturities Debt securities: on the prices quoted by the exchange or the financial institutions from Millions of Yen National government bonds 689,947 2,534,827 480,045 — Local government bonds 356,843 587,669 1,246,103 — Millions of Yen which they are purchased. The fair value of investment trusts is deter- Due after One Due after Five Due in One Due after Carrying Unrealized mined based on the publicly available price. March 31, 2018 Year through Years through Corporate bonds 635,938 379,678 97,139 $ 674,906 March 31, 2017 Fair Value Year or Less Ten Years Amount Gains/Losses For privately placed guaranteed bonds held by the Bank, the fair Five Years Ten Years Other 61,869 691,209 886,117 915,314 Cash and due from banks ¥ 486,264 ¥ 486,264 — value is determined based on the present value of expected future cash Cash and due from banks ¥ 278,366 ——— Loans and bills discounted (*1) 9,122,835 11,192,611 7,761,803 10,762,877 flows, which is adjusted to reflect default risk, amounts to be collected Total $13,540,070 $15,606,363 $10,509,695 $12,353,097 Trading securities 790 790 — from collateral and guarantees and guarantee fees, and discounted at an Securities: Money held in trust 7,007 7,007 — interest rate based on the market interest rate as of the date of evaluation Held-to-maturity securities: Securities Debt securities: Thousands of U.S. Dollars with certain adjustments. Due after One Due after Five Held-to-maturity securities 16,990 17,061 ¥71 Corporate bonds 5,575 ¥ 23,412 ¥ 4,089 — Due in One Due after Information on securities by classification is included in Note 4, March 31, 2018 Year through Years through Available-for-sale securities 1,305,752 1,305,752 — Available-for-sale securities Year or Less Ten Years “Trading securities and Securities.” Five Years Ten Years Loans and bills discounted 4,024,458 with contractual maturities: Deposits $46,249,436 $4,983,358 $19 — Less: Reserve for possible Debt securities: (26,908) Loans and bills discounted Negotiable certificates of deposit 466,867 ——— loan losses National government bonds 73,300 269,300 51,000 — For loans with variable interest rates, the fair value approximates the Payables under repurchase Loans and bills discounted – net 3,997,550 4,019,443 21,893 Local government bonds 37,911 62,434 132,386 — 930,666 ——— carrying value because it reflects the market interest rate in the short agreements Total ¥5,814,353 ¥5,836,317 ¥21,964 Corporate bonds 67,562 40,337 10,320 ¥ 71,702 term as long as the credit status of the borrower has not changed sig- Total $47,646,969 $4,983,358 $19 — Deposits ¥5,341,779 ¥5,343,128 ¥ 1,349 nificantly. For loans with fixed interest rates, the fair value is calculated Other 6,573 73,434 94,141 97,243 Negotiable certificates of deposit 97,679 97,679 — by bundling the type of loans and the internal credit rating using the Loans and bills discounted (*1) 969,210 1,189,103 824,614 1,143,448 (*1) Loans and bills discounted whose cash flow cannot be estimated Payables under repurchase expected future cash flows, which are discounted by the risk free rate and Total ¥1,438,497 ¥1,658,020 ¥1,116,550 ¥1,312,393 54,724 54,724 — such as “legal bankruptcy,” “virtual bankruptcy,” and “possible bank- agreements certain management costs. As for certain consumer loans such as home ruptcy” loans amounting to ¥64,793 million ($609,874 thousand) mortgages, fair value is calculated by discounting the total loan princi- Millions of Yen Total ¥5,494,182 ¥5,495,531 ¥ 1,349 and ¥73,456 million as of March 31, 2018 and 2017, respectively, and Derivatives to which hedge pal with the same rate as a similar loan. Also, for consumer loans that Due after One Due after Five ¥ (1,008) ¥ (1,008) — Due in One Due after loans and bills discounted with no contractual maturities amounting to accounting is not applied mature within one year, the fair value approximates the carrying value March 31, 2018 Year through Years through due to the short maturities. In addition, as for loans to legally bankrupt Year or Less Ten Years ¥24,263 million ($228,379 thousand) and ¥23,418 million as of March Five Years Ten Years 31, 2018 and 2017, respectively, are not included. Thousands of U.S. Dollars borrowers, virtually bankrupt borrowers, and potentially bankrupt bor- Deposits ¥4,913,540 ¥529,432 ¥2 — Carrying Unrealized rowers, the fair value is calculated by deducting the allowance, which is Negotiable certificates of deposit 49,600 ——— March 31, 2018 Fair Value Please see Note 13 for annual maturities of borrowed money. Amount Gains/Losses calculated based on the present value of the estimated future cash flow or Payables under repurchase the estimated collection of cash from collateral and guarantee, from the 98,874 ——— Cash and due from banks $ 3,241,830 $3,241,830 — agreements 27. COMMITMENTS AND CONTINGENT LIABILITIES balance in the consolidated balance sheet date. Therefore, the book value Payables under securities Trading securities 4,998 4,998 — — ———Commitment line contracts on overdrafts and loans are agreements to approximates the fair value. Regarding loans which do not have repay- lending transactions Money held in trust 66,001 66,001 — ment terms because the outstanding amount of the loan is limited to the make loans to customers when they apply for borrowing up to a pre- Securities value of collateral assets, the fair value approximates the carrying value Total ¥5,062,014 ¥529,432 ¥2 — scribed amount, as long as there is no violation of any condition in the Held-to-maturity securities 311,192 311,041 $ (151) because of the estimated repayment periods and conditions of interest. contracts. Available-for-sale securities 11,740,418 11,740,418 — Millions of Yen The total amounts of unused open commitments as of March 31, Loans and bills discounted 39,678,379 Due after One Due after Five 2018 and 2017, were ¥1,382,636 million ($13,014,270 thousand) and Liabilities Due in One Due after Less: Reserve for possible March 31, 2017 Year through Years through ¥1,375,147 million, respectively. Multi-purpose accounts included in (221,047) Deposits and negotiable certificates of deposit Year or Less Ten Years loan losses For demand deposits, the amount payable on demand as of the consoli- Five Years Ten Years the unused open commitments as of March 31, 2018 and 2017, were Loans and bills discounted – net 39,457,332 39,560,034 102,702 dated balance sheet date (i.e., the carrying amount) is considered to be Cash and due from banks ¥ 425,871 ———¥647,389 million ($6,093,646 thousand) and ¥679,426 million, respec- Total $54,821,771 $54,924,322 $102,551 the fair value. Time deposits are grouped by certain maturity lengths Securities: tively. The amounts of unused commitments whose original contract Deposits $51,232,813 $51,238,799 $ 5,986 and their fair value is calculated by discounting future cash flows with Held-to-maturity securities: terms were within one year or unconditionally cancelable at any time as Negotiable certificates of deposit 466,867 466,867 — the same interest rate as that of accepted new deposits. For the deposits Debt securities: of March 31, 2018 and 2017, were ¥1,363,436 million ($12,833,547 thousand) and ¥1,359,010 million, respectively. Payables under repurchase and negotiable certificates of deposits with the repayment period within Corporate bonds 4,269 ¥ 9,642 ¥3,079 — 930,666 930,666 — agreements one year, the fair value approximates the carrying value due to the short Available-for-sale securities Since many of these commitments are expected to expire without maturities. with contractual maturities: being drawn upon, the total amount of unused commitments does not Total $52,630,346 $52,636,332 $ 5,986 necessarily represent actual future cash flow requirements. Many of these Derivatives to which hedge Debt securities: $ 15,088 $ 15,088 — commitments have clauses enabling the Bank and certain subsidiaries to accounting is not applied Payables under repurchase agreements National government bonds 30,000 340,200 67,400 — For payables under repurchase agreements, the contract term is short reject the loans to customers or reduce the contract amounts of commit- Local government bonds 35,183 89,578 77,238 — ment, in the event monetary conditions have changed and the Bank and (within one year). Therefore, the fair value approximates the carrying Corporate bonds 73,908 94,355 4,825 ¥ 61,331 value due to the short maturities. certain subsidiaries need to secure claims, or other considerable events Other 2,939 59,062 147,377 51,995 have occurred. Loans and bills discounted (*1) 960,198 1,184,585 745,319 1,037,482 In addition, if necessary, the Bank and certain subsidiaries can re- Total ¥1,532,368 ¥1,777,422 ¥1,045,238 ¥1,150,808 quest the customers to pledge collateral such as premises and securities

30 31

011_9337401373009.inddm_ns_web_9337401373009.indd 30 32-33 2018/09/04 17:40:32 011_9337401373009.indd 31 2018/09/252018/09/04 14:29:3217:40:32 at the execution of the contracts. After execution, the Bank and certain Millions of Yen Millions of Thousands of 29. COMPREHENSIVE INCOME (LOSS) Yen subsidiaries periodically evaluate the customers’ financial position based Contract The components of other comprehensive income (loss) for the years Yen Shares Contract Unrealized upon the Bank’s internal policy, and take necessary measures to manage March 31, 2017 Amount Due Fair Value ended March 31, 2018 and 2017, were as follows: Net income the credit exposures, such as revising the terms of contracts or securing Amount Gains/(Losses) after One Year Thousands of attributable Weighted Millions of Yen EPS the claims. Over-the-counter U.S. Dollars to owners of Average Shares Interest-related contracts: parent 28. DERIVATIVE INFORMATION 2018 2017 2018 Interest rate swap: Unrealized gains (losses) on For the year ended March 31, 2017: The Bank enters into swaps related to interest rates, foreign exchange Fixed rate receipt, Net income attributable to ¥10,623 ¥408 ¥12 ¥12 available-for-sale securities: ¥10,036 forward contracts, swap and option contracts related to currencies, over- variable rate payment owners of parent the-counter bond options and stock index options contracts related to Gains (losses) arising during Variable rate receipt, ¥7,508 ¥(27,458) $70,670 Amount not attributable to securities. 408 408 (10) (10) the year — fixed rate payment Reclassification adjustments common shareholders (635) 2,918 (5,977) Derivative transactions to which hedge accounting is not applied Over-the-counter to profit or loss Basic EPS―Net income as of March 31, 2018 and 2017 Currency-related contracts: Amount before income tax effect 6,873 (24,540) 64,693 available to common 10,036 37,371 ¥268.56 Currency swap 72,995 42,445 (953) (953) Income tax effect (2,069) 7,315 (19,475) shareholders Millions of Yen Foreign exchange forward: Total 4,804 (17,225) 45,218 Effect of dilutive securities: Contract Contract Unrealized Sell 47,444 181 205 205 Deferred losses on derivatives Stock acquisition rights 34 March 31, 2018 Amount Due Fair Value Amount Gains/(Losses) Buy 27,023 — (288) (288) under hedge accounting: 34 after One Year Losses arising during the year — — — Diluted EPS Net income for Currency option: ― ¥10,036 37,405 ¥268.32 Over-the-counter Reclassification adjustments computation Sell 70,980 41,797 (2,802) 903 — — — Interest-related contracts: Buy 72,413 43,015 2,827 (306) to profit or loss Interest rate swap: Other: Amount before income tax effect — — — 2. Net assets per share Fixed rate receipt, ¥ 384 — ¥ 6 ¥ 6 Sell 14 — (4) (4) Income tax effect — — — Net assets per share as of March 31, 2018 and 2017, were ¥9,183.65 variable rate payment Buy 9— 5 5 Total — — — ($86.44) and ¥8,820.08, respectively. Variable rate receipt, Net assets per share of common stock as of March 31, 2018 and 384 — (4) (4) Listed Land revaluation surplus: fixed rate payment Stock-related contracts: Reclassification adjustments 2017, were calculated based on the following: — — — Over-the-counter to profit or loss Thousands of Index option: Millions of Yen Currency-related contracts: Sell — — —— Amount before income tax effect — — — U.S. Dollars Currency swap 91,167 ¥82,170 820 888 Buy — — —— Income tax effect — (0) — 2018 2017 2018 Foreign exchange forward: Over-the-counter Total — (0) — Total net assets ¥361,253 ¥347,371 $3,400,348 Sell 48,849 958 1,002 1,002 Bond-related contracts: Defined retirement benefit plans: Deductions from total net assets: Buy 24,715 592 (247) (247) Bond option: Adjustments arising during the year 1,315 1,156 12,377 Stock acquisition rights 130 111 1,224 Currency option: Sell ———— Reclassification adjustments Noncontrolling interests 18,007 17,632 169,493 1,252 1,879 11,785 Sell 86,543 55,056 (4,258) 762 to profit or loss Net assets attributable to common 343,116 329,628 3,229,631 Buy 87,905 56,222 4,284 55 Thousands of U.S. Dollars Amount before income tax effect 2,567 3,035 24,162 stock at the end of the fiscal year Other: Contract Number of shares of common stock Contract Unrealized Income tax effect (768) (908) (7,229) Sell — — —— March 31, 2018 Amount Due Fair Value at the end of the fiscal year used for Amount Gains/(Losses) Total 1,799 2,127 16,933 37,362 37,372 Buy — — —— after One Year Total other comprehensive the calculation of net assets per share ¥6,603 ¥(15,098) $62,151 Listed Over-the-counter income (loss) (shares in thousands) Stock-related contracts: Interest-related contracts: Index option: Interest rate swap: 30. PER SHARE INFORMATION Note: Effective October 1, 2017, the Bank implemented a 1-for-10 Sell ———— Fixed rate receipt, reverse stock split of common stock. Net assets per share is determined $3,614 — $56 $56 1. Net income per share Buy ———— variable rate payment Reconciliation of the differences between basic and diluted net income based on the assumption that reverse stock split was carried out at the Over-the-counter Variable rate receipt, per share (“EPS”) for the years ended March 31, 2018 and 2017, was as beginning of the year ended March 31, 2017. 3,614 — (38) (38) Bond-related contracts: fixed rate payment follows: Bond option: 31. SUBSEQUENT EVENT Over-the-counter Millions of Thousands of Sell ———— Yen U.S. Dollars Appropriation of Retained Earnings Currency-related contracts: Yen Shares On June 22 2018, the Bank’s shareholders authorized an appropriation Currency swap 858,123 $773,438 7,719 8,358 Net income of retained earnings as follows: Foreign exchange forward: attributable Weighted EPS Thousands of Sell 459,799 9,017 9,431 9,431 to owners of Average Shares Millions of Yen U.S. Dollars Buy 232,634 5,572 (2,325) (2,325) parent Currency option: Year-end cash dividends: For the year ended March 31, 2018: ¥35.00 ($0.33) per share on Sell 814,599 518,223 (40,079) 7,172 Net income attributable to ¥1,308 $12,312 ¥9,901 common stock Buy 827,419 529,198 40,324 518 owners of parent Other: Amount not attributable to — Note: Effective October 1, 2017, the Bank implemented a 1-for-10 Sell — — —— common shareholders Buy — — —— reverse stock split of common stock. Basic EPS—Net income Listed available to common 9,901 37,374 ¥264.93 $2.49 Stock-related contracts: shareholders Index option: Effect of dilutive securities: Sell ———— Stock acquisition rights 40 Buy ———— 40 Over-the-counter Diluted EPS—Net income ¥9,901 37,414 ¥264.65 $2.49 Bond-related contracts: for computation Bond option: Sell ———— Note: Effective October 1, 2017, the Bank implemented a 1-for-10 reverse stock split of common stock. Basic and diluted net income Notes: per share are determined based on the assumption that reverse 1. Derivative transactions are valued at market and the gains/losses are stock split was carried out at the beginning of the year ended recognized in the consolidated statement of income. March 31, 2017. 2. Market values of exchange-traded transactions are based on closing prices on the exchange markets, such as the Tokyo and Osaka Interna- tional Financial Futures Exchange. Market values of over-the-counter contracts are based on valuation techniques such as the discounted 32 cash flow method and the option pricing calculation models. 33

011_9337401373009.inddm_ns_web_9337401373009.indd 32 34-35 2018/09/04 17:40:32 011_9337401373009.indd 33 2018/09/252018/09/04 14:29:3217:40:32 32. SEGMENT INFORMATION Notes: Under ASBJ Statement No. 17, “Accounting Standard for Segment Information Disclosures” and ASBJ Guidance No. 20, “Guidance on Accounting 1. Ordinary income represents total income less certain extraordinary income included in “Other income” in the accompanying consolidated statement Standard for Segment Information Disclosures,” an entity is required to report financial and descriptive information about its reportable segments. of income. Reportable segments are operating segments or aggregations of operating segments that meet specified criteria. Operating segments are components of 2. “Other” includes business segments of credit cards, computer services and credit guarantees. an entity about which separate financial information is available and such information is evaluated regularly by the chief operating decision maker in 3. Reconciliations mainly represent elimination of intra-segment transactions. deciding how to allocate resources and in assessing performance. Generally, segment information is required to be reported on the same basis as is used 4. Segment profit is adjusted to reconcile to income before income taxes less certain extraordinary items in the accompanying consolidated statement of internally for evaluating operating segment performance and deciding how to allocate resources to operating segments. income.

1. Description of reportable segments 4. Associated Information The Group’s reportable segments are those for which separate financial information is available and regular evaluation by the Group’s management is (1) Information about services being performed in order to decide how resources are allocated among the Group. Millions of Yen The Group consists of the Bank and six (six in 2017) consolidated subsidiaries. The Group provides banking services-based comprehensive financial 2018 Lending Service Securities Services Leasing Other Total services and leasing business. The Group operates its business by units which consists of some branches located in a certain range. However, the Group Ordinary income: discloses these units as a segment of the Banking business because their economic nature is similar to each other. Therefore, the Group consists of two Outside customers ¥40,865 ¥19,416 ¥21,816 ¥22,647 ¥104,744 reportable segments: banking business and lease business. The Banking business is operated by the Bank and provides various services such as deposit-taking and lending services, trading securities, securi- Millions of Yen ties investment, domestic exchange, foreign exchange, managing bonds, a derivatives business and other related businesses at headquarters and branches 2017 of the Bank. Lending Service Securities Services Leasing Other Total The Lease business is operated by Juroku Lease Co., Ltd. It provides leasing business to meet local customers’ needs. Ordinary income: Outside customers ¥41,985 ¥38,635 ¥21,558 ¥23,618 ¥125,796 2. Methods of measurement for the amounts of income, profit, assets and other items for each reportable segment The accounting policies of each reportable segment are consistent with those disclosed in Note 2, “Summary of Significant Accounting Policies.” Thousands of U.S. Dollars 2018 Lending Service Securities Services Leasing Other Total 3. Information about income, profit, assets, liabilities and other items Ordinary income: Outside customers $384,648 $182,756 $205,347 $213,168 $985,919 Millions of Yen Reportable Segment (2) Geographical information 2018 Banking Lease Total Other Total Reconciliations Consolidated (a) Operating revenues Ordinary income: This information is not presented because the Group’s revenues in Japan account for more than 90% of revenues in the consolidated statement of income. (1) Outside customers ¥ 77,993 ¥22,006 ¥ 99,999 ¥ 4,745 ¥ 104,744 — ¥ 104,744 (2) Intersegment transactions 574 300 874 1,094 1,968 ¥ (1,968) — (b) Property and equipment Total ¥ 78,567 ¥22,306 ¥ 100,873 ¥ 5,839 ¥ 106,712 ¥ (1,968) ¥ 104,744 This information is not presented because the Group’s property and equipment in Japan account for more than 90% of property and equipment in the Segment profit 12,243 612 12,855 1,090 13,945 (11) 13,934 consolidated balance sheet. Segment assets 6,039,435 72,336 6,111,771 44,832 6,156,603 (60,035) 6,096,568 Other: (3) Information by major customers Depreciation ¥ 3,781 ¥ 490 ¥ 4,271 ¥ 66 ¥ 4,337 ¥ 124 ¥ 4,461 This information is not presented because there are no customers for which income account for more than 10% of revenues in the consolidated state- ment of income. Amortization of goodwill 245 — 245 — 245 — 245 Interest income 51,656 61 51,717 233 51,950 (111) 51,839 (4) Information about impairment loss by reportable segments Interest expense 2,984 192 3,176 19 3,195 (96) 3,099 Provision (reversal) for possible loan losses (728) (115) (843) 202 (641) — (641) Millions of Yen Increase in premises and equipment and intangible assets 3,009 486 3,495 141 3,636 65 3,701 2018 Banking Lease Other Elimination/Corporate Total Impairment loss on long-lived assets ¥94 — — — ¥94

Millions of Yen Millions of Yen Reportable Segment 2017 Banking Lease Other Elimination/Corporate Total 2017 Other Total Reconciliations Consolidated Banking Lease Total Impairment loss on long-lived assets ¥129 — — — ¥129 Ordinary income: (1) Outside customers ¥ 99,520 ¥21,358 ¥ 120,878 ¥ 4,918 ¥ 125,796 — ¥ 125,796 Thousands of U.S. Dollars (2) Intersegment transactions 456 311 767 1,005 1,772 ¥ (1,772) — 2018 Banking Lease Other Elimination/Corporate Total Total ¥ 99,976 ¥21,669 ¥ 121,645 ¥ 5,923 ¥ 127,568 ¥ (1,772) ¥ 125,796 Impairment loss on long-lived assets $885 — — — $885 Segment profit 12,017 785 12,802 1,761 14,563 (5) 14,558 Segment assets 5,983,891 67,557 6,051,448 42,416 6,093,864 (55,530) 6,038,334 (5) Information about goodwill and negative goodwill by reportable segments Other: Depreciation ¥ 3,754 ¥ 471 ¥ 4,225 ¥ 71 ¥ 4,296 ¥ 151 ¥ 4,447 Millions of Yen Amortization of goodwill 245 — 245 — 245 — 245 2018 Banking Lease Other Elimination/Corporate Total Interest income 59,694 56 59,750 263 60,013 (127) 59,886 Amortization of goodwill ¥ 245 — — — ¥ 245 Interest expense 4,624 221 4,845 22 4,867 (111) 4,756 Goodwill at March 31, 2018 3,119 — — — 3,119 Provision (reversal) for possible loan losses (3,718) 277 (3,441) 139 (3,302) — (3,302) Gain on negative goodwill — — — — — Increase in premises and equipment and intangible assets 5,015 427 5,442 58 5,500 86 5,586 Millions of Yen Thousands of U.S. Dollars 2017 Banking Lease Other Elimination/Corporate Total Reportable Segment Amortization of goodwill ¥ 245 — — — ¥ 245 2018 Banking Lease Total Other Total Reconciliations Consolidated Goodwill at March 31, 2017 3,364 — — — 3,364 Ordinary income: Gain on negative goodwill — — — — — (1) Outside customers $ 734,121 $207,135 $ 941,256 $ 44,663 $ 985,919 — $ 985,919 (2) Intersegment transactions 5,403 2,824 8,227 10,297 18,524 $ (18,524) — Thousands of U.S. Dollars Total $ 739,524 $209,959 $ 949,483 $ 54,960 $ 1,004,443 $ (18,524) $ 985,919 2018 Banking Lease Other Elimination/Corporate Total Segment profit 115,239 5,761 121,000 10,260 131,260 (104) 131,156 Amortization of goodwill $ 2,306 — — — $ 2,306 Segment assets 56,847,091 680,874 57,527,965 421,988 57,949,953 (565,089) 57,384,864 Goodwill at March 31, 2018 29,358 — — — 29,358 Other: Gain on negative goodwill — — — — — Depreciation $ 35,589 $ 4,612 $ 40,201 $ 622 $ 40,823 $ 1,167 $ 41,990 Amortization of goodwill 2,306 — 2,306 — 2,306 — 2,306 Interest income 486,220 574 486,794 2,193 488,987 (1,044) 487,943 Interest expense 28,088 1,807 29,895 179 30,074 (904) 29,170 Provision (reversal) for possible loan losses (6,852) (1,083) (7,935) 1,901 (6,034) — (6,034) 34 Increase in premises and equipment and intangible assets 28,323 4,574 32,897 1,327 34,224 612 34,836 35

011_9337401373009.inddm_ns_web_9337401373009.indd 34 36-37 2018/09/04 17:40:33 011_9337401373009.indd 35 2018/09/252018/09/04 14:29:3217:40:33 I ndependent Auditors’ Report C orporate Data

(as of March 31, 2018)

Date of Establishment: 10 Principal Shareholders: October 10, 1877 Japan Trustee Services Bank, Ltd.(Trust account) Authorized Shares: MUFG Bank, Ltd. 460,000 thousand shares Sompo Japan Nipponkoa Insurance Inc. Shares of Common Stock Issued and Outstanding: The Juroku Bank Employee Shareholders’ Association 379,241 thousand shares Fuji Baking Group Co., Ltd. Stock Listed: Meiji Yasuda Life Insurance Company First Sections of the Tokyo and Nagoya Stock Exchanges Japan Trustee Services Bank, Ltd.(Trust account 9) Paid-in Capital: The Master Trust Bank of Japan, Ltd.(Trust Account) ¥36,839 million Northern Trust Co. (AVFC) RE HCR00 Number of Common Stock Shareholders: Tokyo Marine and Nichido Fire Insurance Co., Ltd. 14,233 Number of Employees: 3,192

A ffiliates

(as of June 30, 2018)

Equity Capital Equity Name Business Lines Established Stake of (¥ Millions) Stake* subsidiaries* Juroku Business Service Co., Ltd. Clerical work service Jan. 1979 10 100.0 — Business consulting service Juroku Research Institute Co., Ltd. Jun. 2013 50 100.0 — Survey and research service Juroku Card Co., Ltd. Credit card flotation service Aug. 1982 55 28.6 43.9 Leasing service Juroku Lease Co., Ltd. Mar. 1975 102 36.2 30.3 Venture capital service Juroku Computer Service Co., Ltd. Computer system development service Aug. 1985 245 26.7 56.9 Juroku Credit Guarantee Co., Ltd. Credit guaranty service May 1979 58 38.0 20.6 *Voting rights held by the Bank, or subsidiaries excluding the Bank, as a percentage of total voting rights.

36 37

011_9337401373009.inddm_ns_web_9337401373009.indd 36 38-39 2018/09/04 17:40:33 011_9337401373009.indd 37 2018/09/252018/09/04 14:29:3317:40:33 Directory

(as of June 30, 2018)

Head Office Branches Handling Osu Branch 8-26, Kandamachi, Gifu-shi, Foreign Exchange 1-14-23, Matsubara,Naka-ku, Gifu 500-8516, Japan Business Nagoya-shi, Aichi Telephone: +81-52-321-5486 Telephone: +81-58-265-2111 (16 Offices) Ozone Branch Corporate Business Division International Office Head Office 8-26, Kandamachi, Gifu-shi, 3-5-23, Ozone, Kita-ku, 8-26, Kandamachi, Gifu-shi, Gifu Nagoya-shi, Aichi Gifu 500-8516, Japan P.O. Box 40 Telephone: +81-58-265-2111 Telephone: +81-52-911-6116 Telephone: +81-58-265-2111 Facsimile: +81-58-266-1698 Ogaki Branch Sakurayama Branch SWIFT Address: JUROJPJ T 1-26, Takayacho, Ogaki-shi, Gifu 5-91, Sakurayamacho, Showa-ku, General Manager Telephone: +81-584-78-2161 Nagoya-shi, Aichi Telephone: +81-52-851-9216 Kenji Kawano Seki Branch Overseas Network 51-1, Higashikashiage, Seki-shi, Gifu Rokubancho Branch Telephone: +81-575-22-2016 2-2-22, Yonban, Atsuta-ku, Shanghai Representative Office Nagoya-shi, Aichi 18th Floor, Hang Seng Bank Tower, Tajimi Branch Telephone: +81-52-652-6571 1000 Lujiazui Ring Road, Pudong New Area, 1-24, Sakaemachi, Tajimi-shi, Gifu Shanghai, People’s Republic of China Telephone: +81-572-22-1301 Kariya Branch Telephone: +86-21-6841-1600 6-35, Wakamatsu-cho, Kariya-shi, Aichi Facsimile: +86-21-6841-1881 Nakatsugawa Branch Telephone: +81-566-21-1611 Chief Representative 2-5-1, Ootamachi, Nakatsugawa-shi, Gifu Osaka Branch Telephone: +81-573-65-3116 Noriaki Murase 2-3-8, Honmachi, Chuo-ku, Takayama Branch Osaka-shi, Osaka Singapore Representative Office 136, Simo Sannomachi, Telephone: +81-6-6264-1600 50 Raffles Place #38-06 Singapore Land Takayama-shi, Gifu Tower, Singapore 048623 Tokyo Branch Telephone: +81-577-32-1600 Telephone: +65-6222-6616 4-1-10, Nihombashi Honcho, Facsimile: +65-6532-6616 Ichinomiya Branch Chuo-ku, Tokyo Telephone: +81-3-3242-1661 Chief Representative 1-2-5, Sakae, Kunihiro Tomita Ichinomiya-shi, Aichi Telephone: +81-586-73-5116 Bangkok Representative Office th Nagoya-ekimae Branch Unit 6 25 Floor CRC Tower, All Seasons Place, 87/2 Wireless Road, Lumpini, Pha- 3-28-12, Meieki, tumwan, Bangkok, Thailand 10110 Nakamura-ku, Nagoya-shi, Aichi Telephone: +66-2655-8016 Telephone: +81-52-561-5431 Facsimile: +66-2685-3016 Nagoya Main Office Chief Representative 3-1-1, Nishiki, Naka-ku, Takayuki Nishikawa Nagoya-shi, Aichi Telephone: +81-52-961-8111 Hanoi Representative Office Unit 1206, Pacific Place, 83B Ly Thuong Kiet Street, Hoan Kiem District, Hanoi City, Vietnam Telephone: +84-24-3927-1616 Facsimile: +84-24-3927-1166 Chief Representative Hiroyuki Kawase

hanha fu refecure (10) ano ano naore oo ranch ch refecure (2) Me refecure (1) saa ranch Total Domestic Offices

38

011_9337401373009.inddm_ns_web_9337401373009.indd 38 40 2018/09/042018/09/25 17:40:3314:29:33 A Snapshot of Juroku Bank Now THE JUROKU BANK,LTD. JUROKU BANK ANNUAL REPORT 2018

鵜飼 匠 支店長 伊藤 鮎美

2nd Stage

Advertisement mascot Advertisement mascot Takumi Ukai Ayumi Itou

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